NEW DELHI
India's retail inflation climbed to 6.09 percent in October, breaching the Reserve Bank of India's upper tolerance limit of 6 percent for the first time in two years, government data shows.
The consumer price index rose from 5.54 percent in September, driven by a sharp rise in food prices that pushed up household expenses.
"India's headline inflation tested the upper end of the RBI's tolerance band in Oct to a two-year high, with a sharp food-driven upmove accompanied by signs of broadening out of price pressures on a sequential basis," said Radhika Rao, senior economist and executive director at DBS Bank.
Food inflation spiked to 8.94 percent in October from 7.74 percent the previous month.
The ministry of statistics and programme implementation said the top items with high inflation were onion, which surged 116.22 percent, garlic at 60.74 percent, silver jewellery at 52.39 percent, ginger at 48.32 percent and lemon at 47.30 percent.
The broader food and beverages category recorded inflation of 8.51 percent.
Aditi Nayar, chief economist at ICRA, said the sustained increase in food and beverages inflation played a key role in pushing up the headline number, even as price pressures broadened across 11 of the 12 CPI divisions.
ICRA expects food and beverages inflation to remain above 8 percent in November, with milk, sugar and onions continuing to exert upward pressure.
Inflationary pressures remained more pronounced in rural areas, where headline inflation increased to 6.63 percent in October from 6.08 percent in September.
Urban inflation rose to 5.41 percent from 4.88 percent in the previous month.
"Onion and garlic prices have shot up, and rural households feel this more because food takes a bigger share of what they spend," said Nirav Karkera, head of research and fund manager at W by Groww.
Beyond food, restaurants and accommodation services recorded inflation of 10.06 percent, while personal care, social protection and miscellaneous goods and services registered inflation of 10.14 percent.
Other personal effects, a subgroup that includes items such as jewellery, recorded inflation of 25.44 percent.
Transport inflation stood at 5.84 percent, while clothing and footwear inflation was 4.96 percent.
Tamil Nadu recorded the highest headline inflation among major states at 7.29 percent, followed by Telangana at 7.26 percent and Andhra Pradesh at 7.25 percent.
All three states recorded inflation substantially above the national average of 6.09 percent.
The central bank is mandated to keep inflation within a range of 2 to 6 percent.
Last month, rising inflation prompted the RBI to join its global peers in raising its benchmark repo rate for the first time in nearly four years, citing raised inflation expectations and broadening of price pressures.
The RBI hiked the benchmark policy rate by 0.25 percent to 5.50 percent in October, while signalling that further rate hikes could follow.
With inflation breaching the RBI's upper tolerance limit, economists expect the central bank to raise interest rates again in December as food prices and adverse base effects threaten to keep the headline reading raised.
"The data reinforces our expectation of a second successive rate hike in December as the headline inflation is yet to peak," said Rao.
Nayar expects CPI inflation to average around 6.2 percent in the third quarter of the fiscal year, slightly higher than the Monetary Policy Committee's projection of 6 percent.
"With the CPI inflation set to remain above the 6% upper bound of the RBI's tolerance band over the next couple of months, and GDP growth likely to ease only slightly in Q2 FY2027 relative to the previous quarter while remaining above the 7.0% mark, a further 25 bps rate hike in December appear almost certain," Nayar said.
The October retail inflation is a key data point before the December 2-4 meeting of the RBI monetary policy committee.
This story was written by the e2gold.ca newsroom from reporting by BNN Bloomberg, Deccan Chronicle and Moneycontrol.com. Quotes are checked word for word against that reporting.