India: Inflation rises more than expected in October
Latest reading: Inflation came in at 6.2% in October, up from September’s 5.5%. October’s reading exceeded market expectations and represented the highest inflation rate since August 2023.
Price pressures for food, which make up around half the consumer price basket, jumped by nearly double digits—the fastest pace since July 2023. Still, core inflation—which excludes energy and food prices, which are volatile—also rose, to 3.7% from 3.6% in the prior month, adding pressure on the Central Bank to delay reducing interest rates, which have been held at 6.50% since early 2023.
The trend pointed up mildly, with annual average inflation coming in at 5.0% in October (September: 4.9%).
Finally, consumer prices increased 1.34% in October over the previous month, picking up from the 0.62% rise seen in September.
Outlook: Our panelists expect inflation to trend down ahead on lower food prices and decelerating domestic demand, coming in around the Central Bank’s 4.0% target in H2 2025. Risks to the outlook are balanced, according to the Central Bank. The main downside risk is strong domestic agricultural output as a result of this year’s likely record kharif crop—whose harvest began in October—thanks to above-average monsoon rains. Upside risks include Trump’s presidency in the U.S.—due to tariffs and a stronger dollar making imports more expensive for India—as well as spikes in oil prices as a result of geopolitical conflict.
Panelist insight: Nomura’s Aurodeep Nandi and Sonal Varma said:
“We believe that inflation has peaked in October and the trajectory is likely to come off hereon, notwithstanding any ugly shocks to vegetable prices in December.”