India’s CPI inflation Spiked to 3.9 percent in September 2019

India’s retail inflation ticked up to 3.99 percent in September compared to 3.28 percent in August 2019, highest since July 2018. The retail inflation was higher than market expectation.

The acceleration in the inflation was largely driven by food and beverages category that ticked up to 4.7 percent in September compared to 2.96 percent in August. Within food and beverages category, vegetable prices rose highest 15.4 percent in September compared to 6.9 percent in August and meat & fish prices rose 10.29 percent in September as compared to 8.51 percent in August.

The food price inflation rose to 5.11 in September compared to 2.99 in August 2019, highest since December 2017 as India experienced skewed rainfall across the country. 

Rural and Urban:

• Rural inflation moved up to 3.24 percent in September from 2.25 percent in the previous month.
• Urban inflation remained flat at 4.78 percent in September as compared to 4.49 percent in the previous month.
• The gap between rural and urban inflation reduced in September compared to previous month as food inflation helped to push  rural inflation upward.

Despite tick up in retail prices more than market expectations, it stayed within the range of RBI’s medium-term target of 4 percent. Given subdued core inflation, weak industrial production (IIP), weakness in consumer demand, RBI is likely to maintain accommodative stance in coming MPC meeting. Moreover, global factors such as volatility in crude oil prices in the near term, weakness in global demand, persisting geopolitical uncertainties would also help to maintain rate cut cycle in coming MPC meeting in December 2019.