Consumer price inflation in India reached a 14-month high of 5.81% in October, driven mainly by a surge in vegetable and edible oil prices, according to a Reuters poll of economists, just below the central bank's tolerance limit of 6.0%.

Food prices, which account for nearly half of the inflation basket, likely rose at an accelerated pace last month.

The government's decision to increase import taxes on edible oils by 20 percentage points in mid-September likely contributed to the faster rise in prices, putting additional pressure on household budgets.

Annual retail inflation, as measured by the consumer price index (CPI), likely climbed for the second consecutive month to 5.81% in October, the highest since August 2023, according to the median forecast from a Reuters poll of 52 economists conducted between 4-8 November. This follows a rise to 5.49% in September, which was higher than expected.

Estimates for the upcoming data, scheduled to be released on Tuesday, range from 5.00% to 6.30%, with nearly a third of predictions forecasting inflation to reach 6.00%, the upper limit of the Reserve Bank of India’s (RBI) 2%-6% target range, or exceed it.

“There is broad-based price pressure with a pronounced increase visible in tomatoes and edible oil. For the former, lower arrivals were primarily due to a lagged impact of unseasonal rains observed in September. For edible oils, a sharp increase is visible because of imported inflation,” said Dipanwita Mazumdar, economist at Bank of Baroda.

“Going forward, rising intensity of climate risks, weaker currency against a stronger Dollar and geopolitical risks might pose further upside risks to inflation,” she added.

The Rupee dropped to its weakest level ever on Thursday following Donald Trump's victory in the US presidential election. The overall strength of the Dollar, along with downward pressure on the Rupee, could be a key factor preventing inflation from easing quickly. 

Core inflation, which excludes volatile items like food and energy and is considered a more accurate measure of domestic demand, was projected to be 3.60% in October, based on the average estimate from a smaller sample of 21 surveyed economists.

“Core would also be on the upside due to frontloading of festive demand and higher gold prices,” according to Mazumdar.