At 6.09%, retail inflation breaches RBI's upper tolerance limit after two years

NEW DELHI: Retail inflation based on the consumer price index (CPI) rose to 6.09% in Oct from 5.5% in Sept, breaching RBI's tolerance limit of 6% for the first time in two years. Inflation has remained above RBI's target of 4% for the fifth month in a row.Economists now expect RBI to raise interest once again after the Monetary Policy Committee's meeting in Dec. RBI has projected full-year inflation at 5.2%, with CPI expected to rise 6% in the current quarter before easing to 5.7% in Jan-March.The surge is largely driven by food inflation, which rose to 8.9% in Oct. Prices of items such as onions (up 116%), garlic (60%) and ginger (48%) spiked sharply. Inflation also became more broad-based as 11 of the 12-item food categories recorded an uptick.Some vegetables continued to offer relief, with prices of potatoes (-14%), cauliflower (-10.5%), brinjal (-3.3%) & cabbage (-2%) declining in Oct. Six states witness retail inflation crossing 7%In as many as six states, retail inflation crossed the 7% mark, with southern states — Tamil Nadu and Telangana (7.3%), Andhra Pradesh (7.25%) and

Karnataka

(7.1%) leading the way. Rural inflation (6.6%) tended to be higher given the higher weight of food items in the basket, as compared to the urban areas (5.4%).

ICRA chief economist Aditi Nayar expects food inflation to remain elevated in Nov, with upward pressure emanating from milk, sugar and onion prices, along with a deficient monsoon and inadequate replenishment of reservoir levels, which have heightened concerns regarding the rabi crop.

Bank of Baroda chief economist Madan Sabnavis said core inflation is also expected to rise in months ahead as FMCG companies have started raising prices, along with an increase in the cost of mobiles, TVs, vehicles and healthcare.NSO data showed that the impact of higher oil prices due to the prolonged conflict in West Asia, despite softening crude prices in recent days, is showing up in sectors such as transport (5.8%) and restaurants (10.1%) which are seeing steady acceleration in costs.