Reserve Bank of India (RBI) governor Shaktikanta Das’s warning of inflation rising sharply in October has turned out prescient. Data released on Tuesday showed the consumer price index rose 6.2% last month from its level a year earlier. In September, it had shown a 5.5% increase.Â
October’s reading is the highest in 14 months and higher than what economists expected. Behind the spike were mainly vegetable prices, which were up 42% from last year as excessive rainfall hurt crops and supplies.Â
With the headline reading now above RBI’s 6% upper tolerance limit, the odds of a rate cut in the monetary policy committee’s December meeting look bleak.Â
Though the rate-setting panel recently shifted its monetary policy stance to neutral, it wouldn’t want inflationary expectations to get entrenched.Â
A weakening of the rupee to an all-time low against the dollar has also raised the spectre of India’s oil import bill climbing, which could stoke inflation if retail fuel prices go up.Â
RBI’s 7.2% GDP growth forecast for 2024-25, however, points to confidence in economic output staying firm. Only if the expansion weakens drastically would growth take priority.
