India's retail inflation rose to a 9-month high of 5.5% in September, influenced by increasing vegetable prices and MSP hikes.
Impact of MSP Hikes:
The Union Cabinet announced MSP increases ranging from 2.4% to 7% for various crops ahead of the Rabi sowing season.
Wheat MSP increased by 6.6% (September retail price rose by 6.7%).
Lower hikes for mustard (5.3%), masoor (4.3%), and chana (3.9%), despite chana retail prices surging by 21.2%.
Economists predict that MSP hikes could add approximately 0.18-0.20% to overall inflation over the year.
If the MSP increases are fully passed on to consumer prices, the potential CPI impact could be about 0.27% in an extreme scenario.
While food prices may cool down from November due to seasonal changes, the MSP hikes are expected to exert upward pressure on inflation in the short term.
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