India's October inflation data are scheduled for release after markets close on November 13. We expect inflation to accelerate to 4.30% y/y from 3.99% y/y in September, which would be the highest print in 16 months and above the Reserve Bank of India's (RBI) mid-point target of 4%. Increases in food prices could once again be the biggest driver for the inflation surge, while we expect fuel and electricity inflation to continue to remain in negative territory.
Meanwhile, India's widening output gap has likely continued to weigh on core measure, so core inflation may drop further—making room for headline inflation also to return to sub-4% levels next year. This will allow the RBI to continue to tread on its easing path, even after the 135 bps of rate cuts so far this year.