Retail inflation breaches 'tolerance limit' of RBI

India's retail inflation reached 6.21% in October 2024, an increase from 4.87% in October 2023, primarily driven by rising vegetable prices. This figure surpassed the inflation target set by the Reserve Bank of India (RBI). The inflation rates for rural and urban regions were recorded at 6.68% and 5.62%, respectively.

The 10.9% increase in food prices has propelled India's retail inflation to a 14-month peak of 6.2% in October, up from 5.5% in September. This surge is primarily attributed to a significant rise in the costs of vegetables and edible oils, which has not been observed in recent years.

The inflation rate recorded in October exceeded the RBI's upper tolerance threshold, with rural areas experiencing a more pronounced increase of 6.7%, while urban consumers faced an inflation rate of 5.6%. This development has diminished expectations for a potential interest rate reduction by the RBI in its monetary policy review scheduled for December.

What was the RBI's inflation target?

The RBI maintained the repo rate at 6.5% this month, with an inflation target of 4%, allowing for a margin of 2% on either side.

By how much did food prices at the retail level increase?

The All India Consumer Food Price Index (CFPI) indicated that food inflation stood at 10.87% for October 2024, with rural and urban rates at 10.69% and 11.09%, respectively. This marked an increase from 6.61% in the same month the previous year.

What contributed to the rise in food prices?

Vegetables experienced the highest inflation among food items, soaring to 42.18% in October 2024 compared to October 2023. Urban areas reported a slightly higher inflation rate for vegetables at 42.63%, while rural areas recorded 41.94%. Following vegetables, oils and fats saw an inflation rate of 9.51%, and fruits experienced an inflation of 8.43%. In contrast, spices recorded a price decline of 7.01%.

Which states/union territories experienced the most and least inflation?

Chhattisgarh reported the highest inflation rate at 8.84% in October 2024, followed by Bihar at 7.83% and Odisha at 7.51%. Conversely, Delhi had the lowest inflation rate at 4.01%, with West Bengal at 4.63% and Maharashtra at 5.38%.