NEW DELHI- Food inflation in India remains above New Delhi’s “comfort” level despite retail inflation easing in October, a government official said on Wednesday.
India’s retail inflation eased in October to a four-month low of 4.87 percent , edging closer to the central bank’s target of 4 percent , which it has said needs to be firmly in sight before it can start lowering rates.
Food inflation, which accounts for nearly half of the overall consumer price basket, was 6.61 percent in October, little changed from an upwardly revised 6.62 percent in September.
“We would like to see a broader moderation in food prices,” the official told reporters in New Delhi.
Vegetable, milk and cereal prices have been volatile and among the key drivers of the Asian country’s inflation.
Last week, RBI Governor Shaktikanta Das highlighted risks from a spike in food prices saying India was vulnerable to “recurring and overlapping” food price shocks.
Meawhile, the sharp widening in India’s merchandise trade deficit in October to a record level, fueled by a broad-based rise in imports, will likely be an outlier, analysts said.
India’s merchandise trade deficit rose to an all-time high of $31.46 billion in October, widening sharply from the $19.37 billion print in the prior month. Imports jumped from $65 billion from $53.8 billion.
“On a sequential basis, about 70 percent of the uptick in imports in October is led by oil, gold and silver imports,” Morgan Stanley said in a note. The increase in gold and sliver imports can potentially be attributed “to certain lumpiness” in demand ahead of the Diwali festive season, it added.
On the increase in oil imports, IDFC First Bank said it probably “reflects some front-loading of imports” with crude oil prices having declined in October.
On a monthly annualized basis, India’s trade deficit rose to 10.4 percent of GDP in October from 6.4 percent of GDP in September.
