India s wholesale inflation persisted in negative territory for a seventh consecutive month, contracting 0.52% in October, faster than September s 0.26% fall. The rate of decline in fuel prices slowed, dropping by 2.47% compared to the previous month s 3.5% fall.
With retail inflation at 5 per cent now and an environment of greater economic stability, how fast should the Reserve Bank of India go in reining in inflation? There are differences of opinion in the Monetary Policy Committee of the central bank.
This is the fourth instance of the retail inflation rate or the consumer price index (CPI) crossing the upper limit of the 4+/- 2 per cent band of RBI's medium-term inflation target in this calendar year.
A member of India s Monetary Policy Committee (MPC) predicts that retail inflation will return to the central bank s comfort band of 2%-6% as vegetable prices soften. The recent spike in vegetable prices, particularly tomatoes, has been unprecedented, but a seasonal softening is expected. Led by vegetables, food inflation reached an over 3-year high of 11.5% in July, pushing retail inflation to 7.44% above the RBI s comfort band.
India s central bank today raised/held the inflation target for this fiscal year, while the citizens of the world s most populous country are burdened with surging food prices. Experts say that the food price pressure may further intensify amid El Nino threats and a normal monsoon season is not enough to curb the galloping pace of price rise.