October 2024 CPI Inflation Trends Higher India’s Consumer Price Index (CPI) inflation for October 2024 continued its upward trend, registering a 6.21% increase, exceeding market estimates of 5.9%. This rise was primarily driven by escalating food prices, with food inflation hitting 9.7%. Among major contributors, vegetable prices surged by 42% year-over-year (YoY), while fruit inflation stood at 8.4% and edible oils increased by 9.5%. Core inflation also moved higher, reaching a 10-month peak at 3.7%, compared to 3.5% in the previous month. This core increase was notably influenced by a sharp rise in personal care and effects, which rose to a 46-month high of 11.0%. Excluding food and beverages, CPI rose to 3.0% from September’s 2.3%, indicating that inflation pressures are broad-based and persistent.
Spice Prices Decline Amid Export Restrictions Spice prices fell for the fourth consecutive month on a YoY basis, affected by export restrictions imposed by Hong Kong and Singapore on Indian spices due to concerns over ethylene oxide (ETO) residues. This led to an increased domestic supply, resulting in reduced spice prices in India. While vegetable inflation remains high—over 42%—the sharpest contributor, tomatoes, saw a monthly increase of 50% in October. However, mandi prices indicate a 27% decline in November. Potatoes and onions also rose by 50-65% YoY. However, a promising kharif/late kharif harvest could provide price relief in the coming months.
Food Inflation’s Elevated Contribution to Overall Inflation Food inflation contributed significantly to overall CPI inflation in October, accounting for 72% of the total, up from 70% in September. The average contribution of food inflation over the past 12 months has been 70%.
Personal Care & Effects Inflation Increases Amid Festival and Wedding Season Personal care and effects inflation increased to an annual rate of 4.7% in October 2024, up from an average of 4.5% through September, as demand rises with the start of India’s festive and wedding season. Within this, the inflation rate in October reached 11.0%. Other components such as education, recreation, and household goods saw marginal upticks, and inflation in personal goods and services climbed, partly due to rising gold prices.
Rural Inflation Outpaces Urban Inflation for 15th Straight Month Rural inflation remains higher than urban inflation, standing at 6.68% YoY, compared to urban inflation at 5.62%. Rural and urban food inflation both rose by 9.7% and 9.8%, respectively. Vegetable prices increased sequentially by 7.7% and 8.9% in rural and urban areas, while edible oils rose by 6.8% and 4.5%. The overall month-over-month increase in food inflation was 2.6% across both sectors. Although super-core inflation (excluding food, fuel, and housing) is lower in rural areas than in urban areas (3.9% versus 4%), food price pressures, especially from vegetables, continue to drive up rural inflation.
Outlook
External Factors and Inflation Risks: With external uncertainties, including U.S. political and economic factors, food inflation poses additional risks. Unless vegetable inflation subsides, the FY25 CPI estimate could reach 5%, above the current estimate of ~4.8%. These dynamics make the outcome of RBI’s February 2025 meeting uncertain, as external fiscal consolidation efforts and internal inflation trends require close monitoring.
Core Inflation Trends: Core inflation is expected to trend back to 4%+ into FY25, as super-core components, excluding precious metals, are rising. Sustained reductions in food inflation will be essential to achieve a durable CPI target of 4%.
Monetary Policy Outlook: No rate cuts are anticipated before February 2025. We project a maximum of 50 basis points cut by the Reserve Bank of India (RBI) in CY25, as the RBI will likely prioritize seeing inflation normalize before any rate cuts.
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