Inflation accelerated again in October. At 5.00 percent, the annual rate was up nearly 0.6 percentage points versus its September outturn and somewhat higher than market expectations. Inflation has now climbed almost 1.3 percentage points from its record August low to stand at a 4-month high.
October's rise was mainly due to more costly food, in particular vegetables where inflation jumped more than 2 percentage points to 2.42 percent. Elsewhere rates were much more stable.
The pick-up in CPI inflation last month is unlikely to surprise the RBI but still makes another cut in official interest rates next month all the less likely.
Consumer Price Indexes (CPI) measure changes over time in general level of prices of goods and services that households acquire for the purpose of consumption. The data are released for previous month and are not seasonally adjusted.
CPI numbers are widely used as a macroeconomic indicator of inflation, as a tool by governments and central banks for inflation targeting and for monitoring price stability, and as deflators in the national accounts. CPI is also used for indexing dearness allowance to employees for increase in prices. CPI is therefore considered as one of the most important economic indicators.
CPI numbers presently compiled and released at national level for India reflect the fluctuations in retail prices pertaining to specific segments of population in the country -- industrial workers, agricultural labourers and rural labourers. These indexes do not encompass all the segments of the population in the country and as such do not reflect true picture of the price behavior in the country. To overcome the above, the Central Statistics Office (CSO) of the Ministry of Statistics and Programme Implementation has started compiling new series of CPI for the entire urban population or CPI (Urban) and CPI for the entire rural population or CPI (Rural), which reflect the changes in the price levels of various goods and services consumed by the urban and rural population.
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