India’s retail inflation rose for the third straight month, inching up to 5% in October from 4.41% in September on costlier pulses and other food items and dimming hopes for another round of interest rate cut by the Reserve Bank of India (RBI).
Consumer food price inflation, a gauge to measure to annual changes in food prices, grew 5.25% in October from 3.88% in the previous month, largely driven by high lentil prices that have hit families hard.
Retail prices of pulses -- a source of protein for households -- jumped 42.20% in October compared to a 29.8% rise in September.
Prices of pulses are now at a five-year high in some parts of the country.
India’s overall retail inflation was 4.62% in October last year, while consumer food price inflation stood at 3.88% in the same month last year.
A series of storms in this spring and a back-to-back drought has hit the output of pulses. Since India has to rely on imports to meet its entire domestic demand, any weather shock results in a big jump in prices.
The output of lentils is estimated to have fallen to 17.38 million tonnes in 2014-15 crop cycle, which usually starts in July and ends in June, from 19.25 million tonnes in the previous year due to a subdued monsoon and unseasonal rains.
{{/usCountry}}The output of lentils is estimated to have fallen to 17.38 million tonnes in 2014-15 crop cycle, which usually starts in July and ends in June, from 19.25 million tonnes in the previous year due to a subdued monsoon and unseasonal rains.
{{/usCountry}}Hailstorms during March and April shrunk the area sown by 10 million hectares.
RBI, which is present its monetary policy review next month, is likely to be keeping a close eye on the price situation.
The RBI, which has cut its key lending rate -- the repo rate -- by 1.25 percentage points to 6.75%, expects inflation to creep up to 5.8% by January 2016 from the current historically low levels.
A higher inflation rate will reduce its elbow room to cut rates further.