Will October inflation push Q3 print above RBI’s forecast?

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Subscribe to enjoy similar stories. At 6.21%, retail inflation in October breached the upper limit of the Reserve Bank of India’s target, for the first time since August 2023, thanks to an alarming rise in vegetable prices. A Mint poll of 18 economists had projected inflation to be at 5.95% for the month.

With a higher-than-expected print, inflation may very well be on track to surpass RBI’s forecast of 4.8% for the October-December quarter. A back-of-the-envelope calculation suggests inflation would have to average just 4.1% in November and December to align with RBI’s forecast. According to ICRA chief economist Aditi Nayar, inflation is expected to exceed the Monetary Policy Committee’s estimate for the third quarter by at least 60-70 basis points.

“A rate cut in the December policy review appears ruled out, in spite of our projection of a sub-7% GDP growth print for July-September," Nayar added. Also read | India’s 14-month high retail inflation fades hope of December rate cut Economists also expected the central bank to raise its inflation forecast for the current quarter in the December policy. Between April and October, inflation has averaged 4.8%, higher than RBI’s projection of 4.5%.

Inflation surged in October mainly due to a sharp rise in food prices, especially vegetables and edible oils. Food inflation rose to 10.87% in October from 9.24% the previous month. The rise was more alarming in vegetable inflation, which surged to a near five-year high of 42.18%.

The increase in import duties of edible oils also reflected significantly, with inflation for oils and fats reaching its highest since June 2022. Apart from the food and beverages group, the increase was also substantial in the miscellaneous group. It