India’s consumer price inflation (CPI) reached a 14-month high of 5.81% in October, primarily driven by sharp increases in vegetable and edible oil prices. This inflation rate is slightly below the central bank’s tolerance threshold of 6.0%. According to a Reuters poll of economists, food prices—accounting for nearly half of the CPI basket—are expected to have risen sharply, with tomatoes, a staple in Indian cuisine, seeing double-digit price hikes due to unseasonal rains disrupting production.
Additionally, the government’s decision to raise import taxes on edible oils by 20 percentage points in mid-September further contributed to rising prices, straining household budgets. The CPI for October marks the second consecutive month of rising inflation, up from 5.49% in September, which was also higher than expected. Forecasts for October’s CPI range from 5.00% to 6.30%, with nearly a third of economists predicting inflation could hit the upper end of the Reserve Bank of India’s (RBI) target range of 2%-6%.
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Economists pointed to the broader price pressures, particularly in tomatoes and edible oils. Dipanwita Mazumdar, an economist at Bank of Baroda, highlighted that unseasonal rains in September affected tomato production, while imported inflation from rising edible oil prices also played a significant role. Additionally, risks such as climate change, a weaker rupee, and geopolitical factors could further exacerbate inflation.
The Indian rupee recently fell to its weakest level following the U.S. presidential election, adding downward pressure on inflation. Core inflation, excluding volatile items like food and energy, is expected to be 3.60% in October, up from 3.50% in September, reflecting strong festive demand and higher gold prices.
RBI Governor Shaktikanta Das has warned of inflationary risks, dampening expectations for an immediate rate cut. While some economists expect the RBI to reduce the repo rate by 25 basis points to 6.25% in December, many caution that the central bank may delay such a move until early next year, with inflation not likely to return to the RBI’s medium-term target of 4% until at least 2026.
In a separate development, wholesale price index-based inflation is expected to rise to 2.20% in October, up from 1.84% in September.
