Spiralling food prices: on rising inflation
India is facing high retail inflation, driven largely by food and fuel costs, which has kept the Consumer Price Index above the RBI's target. The government and central bank are struggling to manage these pressures amidst geopolitical risks and a depreciating rupee.
Why it matters
Persistent inflation threatens the economic stability of rural households and complicates monetary policy decisions for the Reserve Bank of India.
September’s retail inflation, at 5.54% , an almost two-year high, marks the fourth consecutive month that price increases have kept headline CPI above the Reserve Bank of India’s (RBI) 4% target. The impact has been particularly severe for rural Indians, whose inflation rate reached 6.08%. Rural food inflation rose almost two percentage points between August and September, touching 8.06%. Onion (108.09%), garlic (54.62%) and ginger (62.85%) drove the surge, even as potato (-11.50%) and tomato (-8.62%) prices remained below year-earlier levels. The festive season ahead will be expensive for rural households already facing the uncertainties of a deficient monsoon, El Niño-related risks to harvests and incomes, and unusually high temperatures. Headline CPI is now just 0.46 percentage points below the RBI’s upper tolerance limit of 6%.
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