INSUBCONTINENT EXCLUSIVE:
farm prices sent a stark warning to Prime Minister Narendra Modi about the challenges he faces in rural areas in next year's general
election.The rate, which includes food and energy prices, dropped in October to 3.31 per cent on a year-on-year basis, the slowest pace in
13 months and remains below the Reserve Bank of India's (RBI) medium-term target of 4 per cent for a third straight month
The September inflation rate was a revised 3.70 per cent.Inflation risks have ebbed after a fall in global crude oil prices by about 20 per
cent since early October to around $71 a barrel
The rupee has also stabilised after a slide of more than 14 per cent in the first 10 months of this year, which has made it the worst
performing Asian currency in 2018.The RBI's monetary policy committee unexpectedly left the repo rate at 6.50 per cent last month when
markets had expected a hike.In October, the drop in consumer prices was mainly due to the fall in food prices, data released by the
Statistics Ministry showed on Monday.Analysts polled by news agency Reuters had expected the October retail inflation rate would ease to
3.67 per cent, with estimates ranging from 3.23 per cent to 5.20 per cent.A Prasanna, chief economist at ICICI Securities Primary
Dealership, said food inflation continues to be more benign than expected despite fears that some prices might spike as the government steps
in to buy crops at higher prices."The Monetary Policy Committee will take comfort from headline and we expect a pause in December," he said
in reference to the chances the RBI would raise rates before the end of the year
"We still expect a hike in February but will reassess the same given recent inflation prints and fall in oil prices," added Mr
Prasanna.Slower inflation in food prices, which make up nearly half of the consumer price index (CPI), are helped by bumper crop supplies
and sale of subsidised food grain to nearly two-thirds of the country's population of 1.3 billion
That has, in turn, helped keep overall inflation in check.Retail food prices fell 0.86 per cent in October from a year earlier, against a
0.51 per cent rise in September, as farm prices dropped despite the government's announcement of sharp increase in food grain procurement
prices ahead of state elections in the next few weeks.Temporary reliefPM Modi is in danger of losing support in the countryside
Farmers hit by falling farm prices and rising unemployment could undercut his efforts to woo young voters.Core inflation, which excludes
volatile food and fuel prices, came in at 6.1 per cent, up from 5.8 per cent in September, according to analysts
That is because of higher prices for consumer goods and services during the Diwali festival season.The RBI has projected a retail inflation
rate of 4.8 per cent by June 2019, slightly lower than its August forecast of 5.0 per cent.It has raised its policy interest rate 50 basis
points since June, and is widely expected to raise rates by at least 25 basis points more by March 2019.The next policy review is due on
December 5.Separately, industrial output expanded at an annual 4.5 per cent pace in September, compared with 4.3 per cent forecast by
economists in a Reuters poll, and the upwardly revised 4.7 per cent for August.
