At 5.5%, retail inflation hits 9-month high on food prices

NEW DELHI: Retail inflation based on the consumer price index (CPI) rose to a nine-month high of 5.5% in Sept (y-o-y) from 4.8% in Aug, on account of a surge in food prices, which strained household costs, National Statistics Office data released Monday showed.

This was the first time that retail inflation crossed the 5% mark under the new CPI series, which was released earlier this year, remaining above the Reserve Bank of India's (RBI) 4% target for the fourth consecutive month, although the headline figure still remains within the central bank's tolerance band of 2-6%.Data came days after RBI raised repo rates by 25 basis points amid the price pressure. Food inflation was estimated at 7.7% in Sept, compared with 6% in Aug.

With 108% increase, onions recorded the steepest price rise in Sept, compared with 49% in Aug. Garlic prices accelerated 55% from 44%, while lemon prices surged 36% during the month. Some vegetables, however, continued to provide relief, with the prices of potato (-11%), tomato (-8%) and lady finger (-4.5%) falling in Sept.The impact of the prolonged conflict in West Asia is also showing up, with sectors such as transport and restaurants seeing steady increase in costs.

Goods transport services saw 14.7% inflation, while restaurant services saw 9.4% inflation - driven by higher fuel costs.Rural inflation (6.1%) tended to be higher given the higher weight of food items in the basket, as compared to the urban areas (4.9%). The southern states of Andhra Pradesh (6.3%), Karnataka (5.9%), Tamil Nadu (6.8%) and Odisha (6.7%) had higher inflation relative to others.Bank of Baroda chief economist Madan Sabnavis said transmission of higher wholesale price index (WPI) into CPI is yet to be seen, with industries such as durables, FMCG, automobile having announced an increase in prices. It will reflect in the coming months. "The challenge will be the third quarter where inflation will peak at around 6%. Dec policy meeting by RBI, therefore, will warrant another rate hike," he said.DBS Bank chief economist Radhika Rao said, "In the face of higher headline prints, RBI is expected to keep the door open for another rate hike in Dec policy meet."