Retail Inflation: Consumer Price Index (CPI) based inflation in India rose to 6.21 percent in October 2024 from 5.49 percent in September. This is the highest level in the last 14 months and has gone above the Reserve Bank of India's (RBI) target level of 6 percent. The main reason is said to be the increase in the prices of food items.

Inflation of food items had the biggest impact.

According to NSO data, food inflation rose to 10.87 percent in October from 9.24 percent in September. The rapid increase in the prices of vegetables, fruits, oil,, and fatty foods has further increased this increase. The inflation of these items has increased the pressure on the pockets of common consumers.

Differences between rural and urban areas

In October 2024, inflation in rural areas was 6.68 percent and in urban areas, it was 5.62 percent. This means that the impact of inflation was more visible in rural areas. Apart from food inflation, prices of things like spices, sugar, and pulses also fluctuated, but there has been some decline in these items.

New challenge for RBI

The Government of India has given the responsibility to the Reserve Bank of India (RBI) to maintain inflation around 4 percent (with a variation of two percent), but now inflation has gone far above this target. This has posed a big challenge for the RBI.

What will be the next step?

ICRA Chief Economist, Aditi Nair believes that at this level of inflation, the possibility of RBI cutting the repo rate has diminished. She said that this high level of inflation could be 0.6-0.7 percent higher in the third quarter (October- December) of the current financial year. This also indicates that there may not be any major reduction in rates before February 2025.

It is worth noting that the rise in inflation in October is a matter of concern for the Indian economy. This has made living expensive for the common people, and it may be difficult for the RBI to decide on future policies. This time is very important for the government and the central bank, as they will have to take steps to control inflation.