India’s inflation rose to 6.2% in October 2024, marking the highest rate in 14 months. We anticipate that November inflation figures will likely be around 5.3%, with the average inflation for FY25 now estimated at 4.8%-4.9%, compared to the RBI’s target of 4.5%. Inflation is expected to decrease from January onwards, primarily due to base effects.
State-Level Inflation Trends
Larger states continue to see inflation rates surpassing the national average. Among them, Chhattisgarh recorded the highest rate at 8.8% in October, followed by Bihar at 7.9% and Odisha at 7.5%. Notably, year-on-year changes in inflation are significantly outpacing year-to-date changes; for instance, seven states have experienced year-on-year inflation increases of more than 2%. This suggests that food price momentum continues to rise.
The gap between urban and rural inflation trends has remained substantial for the eighth consecutive month, with rural households experiencing inflation 1.07% higher than urban households. This disparity is largely driven by higher food prices, as food items make up 54.2% of the rural inflation basket, compared to 36.3% in the urban basket.
Vegetable Prices and CPI Outlook
We expect some moderation in vegetable prices in November, with retail data up to November 11 indicating a decline. Although headline CPI inflation peaked in October 2024, November and December figures could still exceed 5%. Amid currency market volatility, a higher inflation figure might serve as an advantage for the RBI, potentially delaying a rate-cutting cycle.
Food inflation remains a significant concern, particularly in vegetables, which saw a sharp rise from 10.75% in August 2024 to 42.2% in October 2024. An analysis of the components contributing to year-on-year food inflation shows that vegetables are the largest contributor to both year-on-year and month-on-month changes. We expect some moderation in vegetable prices in November, as retail price data up to November 11 indicates a decline.
CPI Inflation Across States
State-wise, larger states continue to show inflation rates above the national average. In October, Chhattisgarh recorded the highest inflation rate at 8.8%, followed by Bihar at 7.9% and Odisha at 7.5%. A comparison of year-on-year changes with year-to-date changes reveals that year-on-year inflation increases are outpacing year-to-date trends. For instance, seven states have experienced year-on-year inflation increases exceeding 2%. Only in Telangana has inflation declined since April 2024, although it rose slightly compared to October 2023.
Rural vs. Urban Inflation Comparison
The gap between urban and rural inflation trends has persisted for the eighth month, with rural households facing inflation rates 1.07% higher than urban households. This is largely due to higher food prices, as food items comprise 54.2% of the rural inflation basket compared to 36.3% in the urban basket. While urban inflation rose more year-on-year in September 2024, rural inflation saw a higher year-on-year increase of 0.82% in October 2024 compared to urban inflation.
Industrial production (IIP) grew by 3.1% in September 2024, after contracting by 0.1% in August 2024. The mining, manufacturing, and electricity sectors grew by 0.2%, 3.9%, and 0.5%, respectively. Consumer nondurables increased by 2.7% in September 2024 after a decline of 3.5% in August 2024, indicating continued momentum in rural demand.
We are now less optimistic about a rate cut in February, and we believe the first rate cut may be postponed beyond February 2025.
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