Consumer Inflation Eases To 3.31% In October, Slowest Pace In 13 Months

Consumer inflation stood at a 13-month low of 3.31 per cent in October, government data showed on Monday. This was lower than estimates of 3.67 per cent by analysts in a poll conducted by news agency Reuters, and within the Reserve Bank of India's medium-term target. October's consumer inflation reading marked a third straight month in which retail inflation - determined by the Consumer Price Index (CPI) - stood below the central bank's medium-term goal of 4 per cent. Consumer inflation in September stood at a final 3.70 per cent, the Ministry of Statistics said in its official statement.

Monday's data supports the central bank's surprise decision to hold interest rates in its last policy statement. The RBI had, in its October 5 meeting, decided to maintain status quo on key lending rates, while ruling out any reduction for the time being.

Food deflation stood at 0.86 per cent in October, as against inflation of 0.51 per cent in the previous month, according to the official release.

Economists said the surprise dip in food prices led to softening of consumer inflation.

"While the unexpected disinflation in food prices and easing in inflation for clothing and footwear, led to the headline CPI inflation coming in well below our forecast, the sequential hardening in the core inflation driven by miscellaneous items poses some concern,” said Aditi Nayar, principal economist at credit ratings agency ICRA. (What economists say)

The central bank is likely to keep key lending rates on hold in its December policy review, according to economists. “We expect inflation to pick up from here but will remain in line with the RBI's trajectory. We expect the RBI to hold policy rates going ahead with limited opportunities for a hike,” said Shubhada Rao, chief economist, Yes Bank.

Stock markets finished Monday's session with a loss of nearly 1 per cent, as investors turned cautious ahead of release of key macroeconomic data. The Sensex shed 345 points to end at 34,812 after a choppy session, whereas the NSE Nifty settled at 10,482, down 103 points from the previous close, amid selling in all sectors barring IT.

Separate data, also released on Monday, showed growth in industrial production - or factory activity - stood at 4.5 per cent in September, better than estimates of 4.3 per cent, according to the median forecast of 24 economists in a poll by Reuters.

Industrial production growth for the previous month was upwardly revised to 4.7 per cent, the data showed.

(With agency inputs)