India’s September retail inflation picks up to 3.77 per cent year on year

India’s retail inflation rate slightly picked up to 3.77 per cent in September, government data showed on Friday, driven by higher food and fuel prices and a depreciating rupee.

Analysts polled by Reuters had forecast September’s annual increase in the consumer price index at 4.0 percent, compared with August’s 3.69 percent.

Tushar Arora, Senior Economist at HDFC Bank, said, “The story on food has been very much comfortable this year. So much so that it could help mitigate a lot of pain because of the rise in crude prices and a falling rupee. Going forward, the hike in minimum support prices (MSPs) is an upside risk to headline inflation. However, given that it will take time to expand the procurement capacity in the country, it is more of a risk for the next year and not FY19. Amid mixed set of indicators, we would keep a close watch on inflation expectations to second-guess the next move on rates from the RBI.”

“CPI inflation has started inching up despite a favourable base effect due to food prices and miscellaneous goods and services. Urban CPI has already touched 4.31 percent. Core CPI stays elevated at 5.82 percent. While a cut in taxes has partly covered up the negative impact of oil price spike, it may not sustain for very long. Given the massive depreciation of the rupee and elevated Crude prices, RBI will have to resort to policy rate signals sooner than later,” said Rupa Rege Nitsure, Group Chief Economist, L&T Finance Holdings.

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