New Delhi

India's retail inflation experienced a downturn in October, reaching a four-month low and moving closer to the central bank's targeted 4 per cent, a level deemed necessary before considering interest rate reductions, Reuters reported.  

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The annual retail inflation rate decreased to 4.87 per cent in October, down from 5.02 per cent in the preceding month, aligning with the forecast of 4.80 per cent from a Reuters poll of 53 economists. Factors such as lower core inflation, excluding volatile food and energy prices, and a supportive base effect have contributed to the decline.  

Although core inflation statistics are not publicly released by the Indian government, core inflation was projected to be between 4.20 and 4.28 percent, down from 4.5 per cent in September. 

The food inflation component, constituting nearly half of the overall consumer price basket, remained relatively stable at 6.61 per cent in October, only slightly changed from an upwardly revised 6.62 per cent in September. October's inflation rate fell below the upper tolerance band of 2-6 per cent set by the Reserve Bank of India (RBI) for the second consecutive month.  

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Despite the apparent stability in inflation, analysts advocate a cautious approach. Reuters cited RBI Governor Shaktikanta Das, who, in a recent statement, highlighted the risks associated with potential spikes in food prices, considering India's susceptibility to recurrent and overlapping food price shocks. 

While the recent data release indicates consistent inflation levels, economists, such as Madan Sabnavis from Bank of Baroda, recommend a cautious approach given the historical volatility in foodgrain prices, particularly driven by factors like an uneven monsoon.  

The prices of key commodities like vegetables, milk, and cereals have demonstrated volatility and played a pivotal role in shaping India's inflation trends.  

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Aditi Nayar, an economist at ICRA, noted that while the uneven monsoon has contributed to the uptick in foodgrain prices in October, the higher prices of specific vegetables, such as onions, may be mitigated by the typical seasonal downtrend in other vegetables, providing some relief. 

Predictions for the Consumer Price Index (CPI) inflation in the coming months suggest a climb to 5.6 per cent by December 2023. The inflation rate is anticipated to remain within a range of 4.9-5.6 per cent for the subsequent two quarters, according to Aditi Nayar.  

In response to the surge in inflation observed in July, exceeding 7 per cent, India has implemented various measures to curb rising prices, including export bans on rice, wheat, sugar, and tightened restrictions on onion exports. 

(With inputs from Reuters) 

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