India’s headline retail inflation rate dropped to a five-month low of 4.87 percent in October, marking the second consecutive month within the Reserve Bank of India’s (RBI) tolerance band of 2-6 percent. The decline in inflationary pressures can be attributed to the recent decrease in international crude oil prices and continued moderation in core inflation. While risks of inflation persist, the finance ministry’s monthly economic report for October suggests that these factors are likely to help contain the inflation rate.
The report highlights the central bank’s acknowledgement of this development, as they have indicated that any further tightening of monetary policy would depend on the completion of transmission and the necessity of the situation. Furthermore, India’s crude oil basket has seen a decrease in prices, averaging $83.93 a barrel in November compared to $90.08 a barrel in October, according to government data.
Food inflation, on the other hand, remained relatively stable at 6.61 percent, similar to the previous month. However, core inflation, which excludes food and fuel, decreased from 4.5 percent in September to 4.2 percent in October.
The government’s efforts to combat rising retail inflation have yielded positive results. Various measures, such as export bans on wheat, rice, and onion, along with discounted tomato sales, have contributed to a decline in the overall inflation rate. The report emphasizes that the RBI’s consistent monetary policy stance has helped align core inflation with the target, thereby supporting GDP growth.
While the merchandise trade deficit reached a record high of $31.46 billion in October due to increased gold imports, economists are confident that the deficit will moderate in the future. The report acknowledges the need to monitor financial flows in the external sector, as they directly impact the value of the rupee and the balance of payments.
Overall, the finance ministry’s report reiterates that India’s economy has displayed remarkable resilience in the face of a global slowdown, thanks to solid domestic demand. The government and the RBI expect a GDP growth rate of 6.5 percent in 2023-24, although market expectations are slightly lower at around 6 percent. The GDP growth rate for the July-September quarter is set to be released on November 30, and it may exceed the RBI’s forecast of 6.5 percent.
FAQs
1. What is the retail inflation rate in India?
The retail inflation rate in India dropped to a five-month low of 4.87 percent in October.
2. How has core inflation been affected?
Core inflation, which excludes food and fuel, decreased from 4.5 percent in September to 4.2 percent in October.
3. What factors have contributed to the decline in inflationary pressures?
The recent decline in international crude oil prices and continued moderation in core inflation have helped control inflationary pressures in India.
4. What measures has the government taken to combat retail inflation?
The government has implemented various measures, including export bans on wheat, rice, and onion, as well as the sale of discounted tomatoes, to bring down retail inflation.
5. What is the expected GDP growth rate for India?
The Indian government and the RBI expect the economy to post a GDP growth rate of 6.5 percent in 2023-24, although market expectations are slightly lower at around 6 percent.