New Delhi: Retail inflation has hit 6.2% in October, and this is the highest in 14 months.
Significantly, this is outside the upper band of the Reserve Bank of India’s tolerance limit of 6%, is principally triggered by higher food prices especially vegetable staples – tomatoes, potatoes and onions “driving the charge” as per The Hindustan Times. It goes onto say that “Headline Consumer Price Index based inflation increased from 3.7% in August 2024 to 5.5% in September and 6.2% in October. Food inflation number for these three months are 5.7%, 9.2% and 10.9% respectively.” Fortune India has termed India’s food inflation at 9.7% as “eye watering.” Vegetable inflation, it notes, is at a 57-month high.
Such high numbers will in all probability mean that RBI would not be able to go for a rate cut, with direct implications on the rates that households pay on their EMI. Therefore, “households servicing mortgage payments will have to wait longer for a relief on their EMI bills which could have generated a cushion for consumption demand in the economy”, writes Hindustan Times.
Madhavi Arora, lead economist, Emkay Global told Reuters, “Nasty inflation print. October inflation print is the last one before the RBI meets in December, and the higher-than-expected third-quarter inflation will likely impact the RBI’s reaction function. This, in conjunction with consistent downward pressure on the INR, makes an uncompelling reason for the RBI to cut in December.”
Slowdown in wage growth of non-salaried workforce in urban India: Britannia MD
Meanwhile, The Financial Express has cited Britannia’s vice chairman and MD Varun Berry’s comments made during an earnings’ call earlier this week. Speaking to investors, he is cited as saying, “The first reason is costly real estate. Housing costs, which make up 22% of the CPI basket in urban areas, have been on the rise. This is creating stress for most consumers in large cities and metros. The second is a slowdown in wage growth of the non-salaried workforce in urban areas, which has risen 3.4%, slower than inflation.”
The pressure on the working population in India and consumption growth has been consistently recorded and the steep rise in inflation has added to uncertainties in the Indian economy, dependent on consumption demand picking up. Britannia itself, Britannia had on Monday, November 11, reported a net profit fall of 9.4% year-on-year for the second quarter to Rs 586.5 crore.
Reuters notes that “persistently high inflation squeezes middle class budgets, threatening the country’s brisk economic growth.” It says that “slowing urban spending over the past three to four months has not only hurt the earnings of largest consumer goods firms, it has raised questions about the structural nature of India’s long-term economic success.”
