India’s inflation likely to rise

India's headline CPI for October 2015 is expected to print at around 5.02% yoy, higher than the September 2015 CPI print of 4.40% yoy. The expected spike in inflation is due to the waning of the favourable base effect. It is believed that the sub-4% CPI recorded (the lowest inflation recorded under the new series) in July and August did not necessarily reflect the reality of the situation.

"We expect October headline CPI inflation to cross 5% for the first time since June 2015, with prices of fruit and vegetables as well as those of pulses likely to be the major drivers", notes Societe Generale.

With deficient rainfall leading to lower production of pulses even as demand continues to rise, India has resorted to importing large quantities of pulses to keep prices in check. Yet, available indications suggest prices have continued to soar. Inflation is not expected to rise going forward. However, headline inflation will remain below the RBI's near-term target (6% by January 2016).