India: Inflation decelerates to record low in October
Latest reading: Consumer prices were up 0.3% in annual terms in October, following a 1.4% increase in the prior month. The print, which was slightly below market expectations was the lowest since current records began in 2012.
Relative to the prior month’s figures, there were reduced price pressures for food and beverages (-3.7% on a year-on-year basis vs -1.4% in September) and clothing and footwear (+1.7% vs +2.3% in September). Finally, the variation in fuel and light prices was the same as in the prior month (+2.0% in October and September).
The decline in food prices was driven by a high base of comparison—costs were elevated in the same period last year—as well as recently strong harvests thanks to favorable weather. Moreover, October’s print comes after the government eased consumption taxes from 22 September on a range of household goods.
Finally, consumer prices rose 0.15% in October on a month-on-month basis, following a flat reading in the prior month.
Outlook: Average quarterly inflation fell below the RBI’s 2.0–6.0% target for the first time since late 1999 in July–September, and is set to remain so in October–December after our panelists recently slashed their forecasts as food prices continue to fall. Still, inflation is still seen rising above the midpoint of the target again by April–June as the high base of comparison fades.
Panelist insight: Nomura’s Aurodeep Nandi and Sonal Varma said:
“We expect headline inflation to be flat at similar levels of ~0.3% y-o-y in November, with continued softness in most food prices, lagged disinflationary pressures from GST cuts and correction in gold prices. We recently lowered our CPI inflation forecast by 0.4pp to 1.9% y-o-y for FY25, but there is downside risk to this projection as well.”