India’s Inflation High – Trends and Central bank’s steps ahead

The inflation situation in our nation is said to be a lot higher than anticipated. Considering the trend, it has been a lot higher than previously anticipated by the majority. If we consider the inflation for the month of October, it was said to be clocking at 6.21 percent which is said to be an all-time high in the last fourteen months. This is alarming as it has been said to have crossed the benchmark rate of 4 percent set by the Central Bank of India (RBI).

Reasons for high inflation

The major reason for the rise in food inflation is the increasing levels of supply shocks of major vegetables such as tomatoes, potatoes, and onions- considered the main essentials for Indian cuisines. Most states have felt the pinch of the shortage of these vegetables- thus paying a lot more than they usually do. The rise in food prices has been a regular scene in our country for the past two years and continues to hover in the present day. The issue will need to be considered more seriously in the upcoming decision of the RBI governor in the meetings to come. This issue does affect the important indices in the CPI basket. Re-examining the way inflation is to be tackled by means of understanding the food prices should be the ideal approach to tackle the inflation situation in our nation. The upcoming meetings will be a lot more crucial to tackle this important problem.

On the flip side to the inflation trajectory, industrial production is said to have improved marginally as per the data point posted by the RBI. Though there has not been a significant rise in terms of production levels, it does show the industries to be treading toward a growth phase. The IIP (index of industrial production) is said to have posted a 3.1 percent growth YOY as of September. It does show some level of promise in terms of national growth, but it remains to be seen how overall growth projections will be for the coming year.

What to expect….

From the situation presented regarding inflation in our nation, the anticipation of a rate cut is most likely unlikely for the upcoming meetings. In the context of inflation, the meeting for December would mostly be in heavy deliberation. All we can expect would be some important policy tweaks to tackle the situation. A strong pull towards a February month rate cut is likely. It is more likely going to be a good meeting, as we can anticipate a strong balance to control inflation and also maintain a credible monetary policy for the nation.  

Let's all look forward to the meeting scheduled for December 4- 6 2024.