India's October retail inflation remained over 7% for second straight month

NEW DELHI (Reuters) - India’s retail inflation remained above 7% in October for a second straight month as vegetable prices stayed at elevated levels, worrying policymakers, who are struggling to pull Asia’s third largest economy from a deep slump.

Salesmen wearing protective face mask wait for customers at a shoe store during an extended lockdown to slow the spread of the coronavirus disease (COVID-19) in New Delhi, India, May 27, 2020. REUTERS/Adnan Abidi/File Photo

October’s annual retail inflation of 7.61% was higher than the forecast of 7.30% in a Reuters’ poll of economists. It stood at 7.27% in September, government data showed on Thursday.

Retail inflation has remained above 4%, the middle-point of the Reserve Bank of India’s (RBI) target of 2%-6%, for more than a year, giving it little room to cut rates.

India’s economy is likely to enter a technical recession for the first time in its history post independence in 1947, as the central bank forecast a contraction of 8.6% in the July-September quarter. The country reported a 23.9% contraction in the April-June quarter.

Two consecutive quarters of contraction are described as a recession.

The main factor leading to higher inflation was elevated food inflation, which stood at 11.07% in October compared with 10.68% in the previous month.

“High food inflation despite easing restrictions and improving mobility numbers indicates the problem is more complex and likely to persist in the near future,” said Anagha Deodhar, economist at ICICI Securities.

Disruption from the coronavirus pandemic and excessive rainfall in states such as Maharashtra, Karnataka and Andhra Pradesh have damaged and delayed the harvesting of onions - a key ingredient in Indian kitchens - alongside other vegetables.

October’s core inflation was in the range of 5.5% to 5.8%, according to four analysts, compared with 5.7% in September.

Meanwhile, with coronavirus restrictions largely eased, September industrial output grew for the first time in six months at 0.2%. For the April-September period it contracted 21.1%.

Additional reporting by Chris Thomas; Editing by Toby Chopra and Steve Orlofsky