Inflation Squeezes Indian Households as CPI Hits 5.81% in October

Surge in Consumer Inflation Hits 14-Month High

India’s consumer price inflation (CPI) rose to 5.81% in October, marking a 14-month high. The rise was mainly fueled by soaring prices of food items such as tomatoes and edible oils. This inflation spike is close to the Reserve Bank of India’s (RBI) 6% tolerance ceiling, placing additional pressure on already stretched household budgets.

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Rising Food Costs Drive Inflation Spike

Food inflation, accounting for nearly half of the CPI, significantly impacted the overall inflation rate. Tomato prices surged due to erratic weather, while a 20% increase in import taxes on edible oils further strained households. These food-related pressures suggest that inflation may persist in the near term, with economists expecting more price volatility ahead.

Rate Cut Unlikely as RBI Holds Off Easing

Given inflation’s proximity to the upper limit of RBI’s target range, economists believe a rate cut is unlikely until early next year. Suvodeep Rakshit of Kotak Institutional Equities commented, “If you look at RBI's forecast of growth, there is very little reason why support to growth is needed,” emphasizing a conservative approach to monetary policy.

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Core Inflation Stays Elevated Amid Festive Demand

Core inflation, excluding food and energy prices, was estimated at 3.60% in October. Festive demand and rising gold prices kept core inflation elevated, suggesting steady price pressures even beyond food. Economist Dipanwita Mazumdar noted, “Core would also be on the upside due to frontloading of festive demand.”

Outlook: Inflationary Pressures to Persist

Multiple factors, including climate risks affecting crops, rupee depreciation, and global uncertainties, could keep inflation elevated. With inflation above RBI’s 4% target until at least 2026, economic stability faces a growing challenge. Rate cuts may remain on hold as the RBI balances inflation control with sustaining growth.

Conclusion: Households Brace for Higher Costs

With inflationary risks persisting, Indian households face a prolonged period of elevated prices, particularly for essentials. The rising cost of living highlights the need for caution in economic policy as inflation continues to pressure consumers and businesses alike.

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