Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research
“In line with our expectations, the CPI inflation has continued to be firm and has actually marginally increased to 7.6% in Oct 2020 as compared to 7.3% in Sept 2020. Food prices haven’t yet shown any signs of declining with the inflation print at 10.2% in the previous month as compared to 9.7% in Sep. The prices of key vegetables including onions continue to be high as reflected in a very high YoY inflation of 22.5% and similar trends are seen in animal protein category where the YoY CPI growth came at 18.7%. Clearly, this indicates that supply and logistical challenges continue to remain high. We believe that the likelihood of a material decline in CPI is low in the near term unless significant steps are taken to address such supply side challenges. With WPI also showing a higher trajectory in the last month, there is also a risk of a rise in core inflation going forward. The management of bond yields can prove to be seriously challenging in such an inflationary and tough fiscal environment.”
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