India’s retail inflation eases amid concern about soaring fuel prices

India’s retail inflation eased to a five-month low in September, helped by softer food prices and weak consumer demand, amid rising concerns among businesses and policymakers about soaring global energy prices.

Consumer prices rose 4.35 per cent in September from the same month last year, lower than August’s 5.3 per cent annual inflation rate and below a Reuters poll of 4.5 per cent, data released by the Ministry of Statistics showed on Tuesday.

Consumer prices in Asia’s third largest economy had increased 7.3 per cent year-on-year in September 2020.

Food prices, which contribute to nearly half of the consumer price index (CPI), rose 0.68 per cent year-on-year in September, compared to 3.11 per cent a month before.

However, the recent surge in global crude oil prices to near $83 a barrel is making policymakers and consumers nervous given that India meets over 80 per cent of its oil needs through imports.

“Energy shortages and rising oil prices are already having ripple effects on production and prices of other commodities,” said Sakshi Gupta, senior economist at HDBC Bank.

“This remains an upside risk for inflation once the base effect wears off from December onwards,” she said. The picture looked rosy on the inflation front, she said, though the economy faced challenges with global concerns about stagflation rising.

The Reserve Bank of India’s monetary policy committee left the repo rate  unchanged at 4 per cent last Friday, while asking the government to consider lowering taxes on petrol and diesel to help contain inflation.

Rising oil prices pushed up retail fuel prices by 13.63 per cent in September from a year ago period, while prices for clothing and footwear spiked 7.16 per cent.

Annual core inflation, excluding volatile food and fuel costs, was estimated at between 5.75 per cent and 5.8 per cent in September, according to three economists, remaining unchanged from the previous month’s level.