In October 2024, India’s Consumer Price Index (CPI) inflation surged to a 14-month high of 6.21% YoY from 5.49% in the previous month. The increase in headline inflation was largely driven by a rise in food inflation to 9.7% YoY in October 2024 from 8.4% YoY in September. Food inflation also remained broad-based, with 46% of items in the food basket witnessing inflation rates surpassing 6%.

Vegetables remained the largest contributor to CPI inflation, with vegetable prices rising by 42% YoY. This increase was largely driven by a sharp rise in tomato prices and the continued uptrend in onion prices. Vegetable prices have exceeded typical seasonal trends since last year. Additionally, edible oil prices rose sharply due to the hike in import duties in September 2024.

Core inflation increased to 3.7% YoY in October 2024 from 3.6% YoY in the previous month. Core inflation and its refined measures have bottomed out because of the revision in mobile tariffs and the increase in gold prices.

We expect inflation to average around 4.5-4.7% in FY25. The RBI could consider a rate action in February 2025 if food inflation eases during the winter months in line with seasonal trends.

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