India staring at higher inflation

India staring at higher inflation

Fresh price rise of onion and potato,  the two vegetables with the highest weight in retail inflation that hits common man directly, is expected to keep the Consumer Price Inflation (CPI) higher in October.

Onion and potato together account for 27% of total weight of vegetables in the CPI index.

Added to that, costlier petrol and diesel prices putting pressure on input costs of manufactured products is expected to keep the Wholesale price inflation (WPI) higher in October. Manufactured products weigh over 64% in the WPI.

The official data for consumer and wholesale inflation is expected to come out on Monday and Tuesday respectively.

Going ahead the National Horticultural Research and Development Federation has estimated onion output in Karnataka, the second-largest producer of onions, to fall sharply this kharif season from over 10 lakh tonne last year.

A higher allowance from the increased house rent allowance of the Centre has already put pressure on housing inflation since August. It is expected to only flare up after states increase the allowances following the Centre.

The consumer price inflation was 3.28% in September when prices of onion and potato had fallen but unseasonal rains in Karnataka and Mahrashtra rebounded the price pressure as the output in the kharif season was lower and supplies were hit. Moody's has already flagged concerns in its report about higher food prices, particularly vegetables, to keep the prices in WPI on the upper side. Analysts have also forecast an upward pressure on inflation in the coming months due to rising crude oil prices and higher raw material costs due to the GST rollout.

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