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Below the Quote on CPI data by Vinit Bolinjkar- Head of Research at Ventura Securities.

The recent surge in India's CPI inflation to 6.2% in October 2024, a 14-month high, primarily driven by food prices (which rose to 10.87%), reflects a growing economic challenge as it breaches the RBI’s 2-6% tolerance range. This broad-based inflation extends into core items, indicating that price pressures are not limited to volatile sectors and could signal a longer-lasting trend. This rise in essential costs is already affecting consumer demand, particularly for discretionary goods, as households prioritize basic needs, leading to weaker sales growth reported by many consumption-focused companies.

Industrial growth has also softened, with IIP growth at 3.1% in October and only 2.6% for the September quarter, underscoring a cooling momentum in manufacturing. This deceleration, along with higher input costs, is likely to dampen both investment and production in the near term. Given these pressures, the RBI may consider tightening monetary policy to curb inflation, though it must balance this with the risk of further slowing economic growth, especially in sectors like consumer durables, which are highly sensitive to demand shifts.

As global commodity prices and domestic challenges like climate impacts continue to influence food inflation, this may further strain rural demand and pose risks to sectors reliant on rural spending. Overall, India faces a challenging economic landscape where the RBI will need to weigh inflation control measures carefully to support growth without stifling economic recovery.

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