India's October consumer inflation likely nears top of RBI target on food costs: Reuters poll

BENGALURU: India's consumer inflation likely accelerated in October, edging closer to the upper end of the Reserve Bank of India's 2% to 6% target range, as a broad-based rise in food prices pushed up household costs, a Reuters poll of economists showed. Food prices, which account for nearly 40% of India's consumer price index, have risen sharply in recent months after an uneven and deficient monsoon reduced supplies of key household staples.

Onion prices have nearly doubled since the start of the year, while even relatively less volatile protein-rich foods such as meat, milk and eggs have become more expensive. Rising global food prices have added to domestic pressures, particularly by increasing the cost of imported edible oils and other commodities, economists said. Annual consumer inflation likely rose to 5.93% in October from 5.54% in September, according to the median forecast in a November 2-6 Reuters poll of 36 economists.

Forecasts for the data, due on November 12, ranged from 5.50% to 6.60%. Nearly half of economists polled expect inflation to be at or above 6% in October, the upper end of the RBI's target range. Higher food inflation would still be the largest contributing factor to accelerating inflation, said Dhiraj Nim, senior economist at ANZ.

The southwest monsoon outturn was very uneven and deficient overall. In many parts of the country, conditions are drought-like ... we could stay in an elevated inflation period for a long time. Food inflation likely picked up to 8.20% in October from 7.74% in September, the poll showed.

We expect meat, fish, oils and fats, fruits, vegetables and sugar to report double-digit inflation, said Rahul Bajoria, head of India and ASEAN economic research at BofA Securities. Inflation has remained above the RBI's 4% medium-term target for four consecutive months. Economists expect price pressures to persist in the coming months, with oil prices still about 40% above their levels before the US-Iran war.

The RBI, which began its rate-hike cycle in October, expects inflation to average 5.2% in the current financial year, above its previous forecast of 5.0%. The latest projection is also higher than the 5.1% median forecast in a Reuters poll conducted last month. At its next policy meeting in December, the central bank is widely expected to raise the repo rate for a second straight meeting to 5.75%, according to last month's Reuters poll.

It may be prudent for the RBI to continue with its calibrated 25-basis-point rate-hike momentum, said Kanika Pasricha, chief economic advisor at Union Bank of India. Core inflation, which strips out volatile food and fuel prices and is seen as a better gauge of underlying demand, is expected at 4.45% in October. The Indian statistics office does not publish official core inflation data.

Separately, wholesale price index-based inflation likely accelerated to 12.10% in October from 11.39% in September, the survey showed. Persistently high wholesale prices could add to retail inflation pressures in the coming months if producers pass higher input costs on to consumers.