India's October inflation due at 4 pm: economists expect about 6%, a two-year high

India Ratings' 9.1% would be a high for the new series, which uses 2024 as the base year. For core inflation, which leaves out food and fuel, Bloomberg Economics expects 4.5% against 4.3% in September, and Nirmal Bang expects 4.7% against 4.6%. Wholesale inflation is also forecast to rise: Nirmal Bang sees it at 12.35%, up from 11.4% in September, because of fuel and commodity prices and an unfavourable base.

What is pushing food prices up

Nirmal Bang attributes the rise in food mainly to cereals, pulses and edible oils, after below-normal rainfall. Meat, eggs and dairy are becoming dearer because feed costs have risen. September's ministry data shows how uneven the picture is: onions were 108.09% dearer than a year earlier and ginger and garlic were up more than 50%, while potatoes and tomatoes were cheaper than a year before. The price of silver jewellery, which sits in the miscellaneous group, was up nearly 88%.

Milk will add to this in coming months. Amul and Mother Dairy announced increases of Rs 2 to Rs 4 a litre from 12 November, but those prices start the same day as the release and will not appear in the October number. The earliest they can show is the November reading.

The agriculture ministry's sowing data points the same way. Rabi sowing was 17.21% below last year at the start of November, with wheat down 12%, after a monsoon 13% short of normal. SBI Research estimates agricultural losses of about 38.6 million tonnes across the kharif and rabi seasons because of El Niño rainfall deficits, a figure that bears on food prices well beyond October.

September's release gives the starting point for the regional picture. Rural inflation was 6.08% and urban inflation 4.88%, against 5.24% and 4.31% in August, and food inflation was 8.06% in rural areas and 7.18% in urban areas. Headline inflation climbed from 4.83% in August to 5.54% in September, so a move to 6% in October would be a smaller step than the one before it. The Reserve Bank's target is 4%, with a tolerance band of 2 percentage points either side, which is why 6% is treated as the line. A reading at the line is not a breach by itself, and a reading above it, even by a decimal, would be reported as one.

What it means for the RBI and for borrowers

The Reserve Bank raised its repo rate by 25 basis points to 5.50% on 7 October and moved to a stance of calibrated tightening. Forecasters now expect more. Bloomberg Economics expects rate rises in December and February. Nirmal Bang expects about 50 basis points over the next two policy meetings and sees a shallow cycle, with inflation back at 4.5% to 5% in 2027-28. BofA Securities expects 75 basis points in total over the next six to nine months.

For borrowers, a further rise would flow into loans linked to the repo rate, including many home loans, whose rates reset at the lender's next review date. Savers would see deposit rates rise with a lag. The decision will not rest on one number: the committee also looks at growth, and growth looks strong. BofA Securities estimates GDP growth of 7.7% for July to September, SBI Research 7.8%, both above the RBI's own estimate of 7.2%.

The risks the forecasters list are elevated crude oil prices, geopolitical uncertainty, an uneven monsoon and tighter policy. Crude has eased in recent days, with Brent below $92 a barrel on 9 November, which helps the outlook for the months ahead but does not change October's reading. The things to read in the 4 pm release are the food figure, the gap between rural and urban inflation, and whether core inflation moves up with it, since a rise in core would show price pressure spreading beyond the vegetable market.