CPI inflation in October to moderate further, outlook remains benign: Economists

New Delhi, Nov 7 Based on the trends seen in the movement of essential commodities, economists on Friday said that CPI inflation in October is likely to moderate further to 0.4 per cent-0.6 per cent, compared with 1.5 per cent in September, supported also by a favourable base.

The Bank of Baroda (BoB) Essential Commodities Index (BoB ECI) continued to contract and declined by 3.6 per cent in October and further by 3.8 per cent in November (up to November 6).

“In saying so, food inflation has been trending lower largely due to the continued deflation seen in vegetables category, specifically TOP (tomato, onion and potato) vegetables. This in turn is supported by a significant pickup in mandi arrivals,” said Aditi Gupta, Economist, BoB.

In fact, Unified Portal for Agricultural Statistics (UPAJ) data shows that mandi arrivals of tomato, onion and potato are higher by 14.3 per cent, 30.5 per cent and 23.1 per cent, respectively in the April-October period, over the same period last year.

“A similar trend is expected to persist in the coming months too, as the harvesting season sets in. This is likely to lend a considerable degree of downward bias to India’s overall inflation outlook,” Gupta noted.

In fact, prices of TOP vegetables have seen a sustained fall this year. Prices of onion declined by 51.2 per cent in October, marking the strongest pace of contraction since December 2020. Retail prices of tomato also declined sharply by 39.9 per cent in October, compared with a decline of 8.3 per cent in September.

Prices of potatoes too have seen a sustained decline in the last seven months. In October, retail prices of potato declined by 31.3 per cent. The CPI weighted trajectory for TOP in September based on retail prices have fallen on an aggregate basis by -29.5 per cent.

Among other items, major pulses have also continued to witness a deflationary trend in October. Within this group, price of Tur dal has dropped most significantly by 29.4 per cent -- the largest decline since January 2018.

“The outlook for inflation also looks benign, supported by tailwinds from GST rate rationalisation and lower global commodity prices,” said the report.

Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor