India's retail inflation, measured on the India Consumer Price Index (CPI), worryingly soared further to a 14-month high of 6.2% in October 2024, breaching the upper limit of the MPC's medium-term target range of 2-6%. The CPI inflation rose from September's inflation rate of 5.5%. The corresponding inflation rates for rural and urban are 6.68% and 5.62%, respectively. The sequential hardening in inflation was largely led by the food and beverages segment, followed by a mild uptick in the core items.

The food and beverages inflation surged to an eye-watering 9.7% in October 2024 from 8.4% in the previous month, amid an uptick in 7 of the 12 food groups. Vegetables inflation hardened to a 57-month high of 42.2% from 36% in September 2024, which weighed on the food and beverages and, consequently, the headline inflation prints in the month.

Excluding vegetables, both these prints were much more benign, at 4.3% and 3.6%, respectively, albeit slightly higher than the readings seen in September 2024.

"During October 2024, a significant decline in inflation is observed in pulses & products, eggs, sugar and confectionery and spices subgroup. High food inflation in October 2024 was mainly due to increase in inflation of vegetables, fruits and oils and fats," the finance ministry says in a statement.

The all-India reservoir storage stood at 86% of the live capacity at full reservoir level (FRL) as on November 7, 2024, which is likely to support rabi sowing in the ongoing season. However, concerns related to the low inventory levels of di-ammonium phosphate (DAP) and reservoir storage in some states like Punjab may impede the progress of sowing and thus are key monitorables for the rabi season.

The core (CPI excluding food and beverages, fuel and light, and petrol and diesel for vehicles) inflation inched up to 4.0% in October 2024 from 3.8% in September 2024,  the highest level since November 2023.

The housing inflation rate, compiled from housing data only, stood at 2.81% in October 2024, while the corresponding inflation in September 2024 was 2.72%. The All India Electricity index and inflation for October 2024 are 162.5 and 5.45%, respectively, compared to 162.4 and 5.39%, respectively, in September 2024.

With mixed trends for various food items amidst a favourable base, ratings agency ICRA expects the food and beverages inflation to ease to 8.0-8.5% in November 2024 (+8.0% in November 2023) from 9.7% in October 2024 (+6.3% in October 2023). Overall, after peaking at 6.2% in October 2024, the headline inflation print is likely to soften to 5.5-5.7% in November 2024.

"With the CPI inflation breaching the 6% mark in October 2024 and expected to exceed the MPC's estimate for Q3 FY25 by at least 60-70 bps, a rate cut in the December 2024 policy review appears ruled out, in spite of our projection of a sub-7% GDP growth print for Q2 FY25. We anticipate that a shallow rate cut cycle of 50 bps may commence in February 2025 or later," says Aditi Nayar, chief economist and head of research and outreach, ICRA.

Upasna Bhardwaj, chief economist, Kotak Mahindra Bank says the sharply higher-than-expected CPI inflation has largely been led by a surge in vegetable prices but also a sharp pickup in core inflation. "We expect the uptick in food prices to keep the headline inflation higher than 5% even in the next reading before the seasonal downturn begins to bring down inflation. We expect the RBI to stay on hold in the upcoming December policy before considering a cautious easing from February."

The index of industrial production (IIP), meanwhile, expanded by 3.1% on a year-on-year (YoY) basis in September 2024 after declining by 0.1% in August 2024, amid a favourable base. "The uptick was broad-based with all the use-based segments witnessing an improvement in their YoY growth in September 2024 vis-à-vis August 2024. Balancing between the positive impact of the early onset of the festive season and an unfavourable base (+11.9% in October 2023), ICRA anticipates the YoY IIP growth to print at 3-4% in October 2024," says Nayar of ICRA.

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