Retail inflation climbed to 6.21 per cent in October, up from 5.49 per cent in the previous month, driven primarily by higher food prices, according to official data released on Tuesday. This marks a breach of the Reserve Bank of India's (RBI) upper tolerance limit.


Inflation based on the Consumer Price Index (CPI) was 4.87 per cent in October 2023.


Data from the National Statistics Office revealed that inflation in the food basket surged to 10.87 per cent in October, compared to 9.24 per cent in September and 6.61 per cent in the same month last year.


The RBI, which kept the key short-term lending rate unchanged earlier this month, is mandated by the government to maintain inflation at 4 per cent, with a permissible margin of 2 per cent on either side.


The rise in food prices was primarily driven by higher costs for essential items such as vegetables, fruits, and oils. Notably, prices for tomatoes, onions, and potatoes remained elevated throughout the month. In contrast, inflation for pulses, eggs, sugar, and spices saw significant declines.


Speaking on the numbers, Akhil Mittal, Senior Fund Manager - Fixed Income, Tata Asset Management, said, "India CPI for October 2024 came in at 6.21 per cent, much higher than market expectations of 5.90 per cent. Large part of the higher inflation can be attributed to higher food inflation which came in at 10.87 per cent vs 9.24 per cent previous month.”


“While it was widely expected that inflation will remain high, the print of above 6 per cent (which is higher side of allowed band) could mean that MPC will push back on any easing in the policy. We do not expect any rate cut in upcoming December policy and further will be a function of unfolding growth and inflation trajectory. On market side, we expect yields to mildly inch-up for near trading sessions,” he added.


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