October CPI inflation eases to another all time low of 5.52%

13 Nov 2014 Evaluate

In an encouraging development for the economy, India’s consumer price inflation eased at another all time low level since the launch of the new series of Consumer Price Index in 2012, at 5.52% in October as compared to 6.46% in September, helped by the lower prices of food and fuel. The numbers were way lower than street expectation of a figure above ‘5.60%’.

The General Indices for rural, urban and combined stood at 147.2, 142.6 and 145.2 respectively. The corresponding provisional inflation rates for rural and urban areas for the month under review stood at 5.52% and 5.55% as compared to 6.68% and 6.34% respectively in the previous month.

Retail Inflation for the month under review declined mainly on account of food inflation. The vegetable price inflation lowered significantly to -1.45% versus 8.59% in September. The newly introduced CFPI of October, 2014 for rural, urban and combined stood at 152.1, 149.2 and 151.2 respectively.

Inflation of food and beverages (combined), with 59.31% weigtage of the index, receded to 5.68% as against 7.56% in September. Besides, Fuel and light prices, with 10.42% weightage in the index ebbed to 3.29% on a yearly basis, 3.45% in September, additionally, inflation in clothing, bedding and footwear eased to 7.45% in month under review against 7.59% in September. Core inflation, which denotes prices for non-food and non-fuel items, came in at 5.85% compared to 5.9% in the previous month.

The decline in retail inflation strengthens the case for interest rate cuts by the Reserve Bank of India, as the RBI has set a target of bringing inflation down to 8% by January 2015 and 6% by January 2016. However, Governor Raghuram Rajan has admitted to upside risks on the latter target.