India’s retail inflation in October has eased down to 6.77%. That’s indeed good news. Let’s explore what will happen next.
Since the mid of 2022, everyone has talked about inflation. Many countries are still going through challenging phases while trying to ease inflation. But, after a reasonably long time, RBI’s MPC's efforts are showing positive results. According to October’s data, the retail inflation in India has eased to a 3-month low!
Inflation Data
• The annual retail inflation in September 2022 was 7.41%. But, in October, retail inflation eased down to 6.77%.
• The wholesale inflation in October fell to its 19 months low at 8.39%, which was 10.7% in September.
• Retail food inflation for October stood at 7.01%, which was 8.6% in September 2022.
Reason Behind Inflation Coming Down
The commerce and industry ministry stated that the decline in the rate of inflation in October 2022 is primarily due to the fall in commodity prices like mineral oil, basic metals and fabricated metal products.
According to Reuters, the ease in inflation was helped by a ‘slower rise in food prices and a higher base effect.’ This is justifiable because food prices account for nearly 40% of the CPI basket, and we saw a favourable decline in food inflation.
Is There Still a Risk for Growth?
Recently, before the inflation data was out, RBI Governor Shaktikanta Das said while speaking at an event, ‘any inflation above 6% for a prolonged period is detrimental to growth’.
As inflation is still not close to the RBI’s target of 2%-6%, many private economists have cut growth projections for India for this year and the next year, 2023.
The renowned rating agency Moody's revised India's GDP growth forecast to 7% in 2022. This earlier was 7.7%. Moreover, the growth forecast for 2023 was 4.8%.
What’s Next?
From a global perspective, every country is looking up to the US Fed to see how it will perceive the slowdown. On 16th November 2022, a member of the Federal Reserve Board of Governors, Christopher Waller, said, "Have made me more comfortable considering stepping down to a 50-basis-point hike."
As inflation has begun to cool down in India, it is still not close to the RBI’s threshold of 2%-6%. Hence, the rate hikes might still occur at a slower pace than before.
