Retail Inflation Soars To 7.41% In September Amid Rising Food Prices

The Consumer Price Index-based (CPI) inflation or retail inflation for the month of September 2022 came in at 7.41%, up from 7% in August, according to data released by the National Statistical Office (NSO) showed on October 12, 2022.

Retail inflation for the month of September, 2022 has turned out to be highest since April and above the upper end of Reserve Bank of India's 2-6% tolerance band on higher food and energy costs.

According to Madhavi Arora, Lead Economist, Emkay Global Financial Services, "High-frequency mandi prices indicate that prices of perishables could increase going forward as well. However, global commodities (ex-energy) on an average are easing, which, if sustained, should act as a moderating influence on headline inflation. But watch out for near-term offsetting factors which may come from food owing to unseasonal rains, sticky motor fuel prices, and higher kerosene prices, INR weakness etc. With domestic demand fairly resilient so far, core CPI pressures may remain reasonably sticky in near-term sequentially. That said, lower imported inflation on net and base effect should directionally still imply lower inflation on YoY basis in 2HFY23 vs 1HFY23. But This will unlikely to derail the RBI's tightening path as inflation still remains elevated."

Earlier, a Reuters poll of 47 economists hinted retail inflation to surge to an annual 7.30% in September from 7% in the previous month, staying above Reserve Bank of India's upper tolerance band for a ninth month.

"There is a strong pressure from food that is playing out. What is even more worrying is the cereals and pulses inflation which has remained low for quite some time, will rise at an unprecedented pace," said Dharmakirti Joshi, chief economist at Crisil.
Factors such as erratic rainfall and supply shocks resulted from Russia-Ukraine war led to increased prices of cereals and vegetables.

Earlier, the central government has introduced several measures to tame the stubborn inflation that may included export restrictions on rice.