NEW DELHI: Retail inflation, based on the Consumer Price Index (CPI), likely fell to 5.6% in November from a 14-month high of 6.21% in October, according to the median of 17 estimates. The sharp decline in the headline print was mainly due to cooling food prices, specifically of vegetables.
In November 2023, CPI inflation stood at 5.55%. The National Statistical Office (NSO) will release the retail inflation data for the month, on Thursday.
At the projected 5.6% print, the overall retail inflation index likely declined 0.1% on a month-on-month basis in November, the first sequential fall seen in the past 10 months.
According to Morgan Stanley, the drop in the inflation rate in November was aided by “a moderation in food prices, even as core ticks up and fuel continues to decline”. On a sequential basis, we anticipate the index to decline on the back of contracting food prices and a deceleration in core CPI, the investment bank said in a report.
As per economists, vegetables inflation, which shot up to 42% in October, likely moderated to about 27% in November. The significant fall in the group’s inflation rate (carrying a weight of 6% in the CPI basket), was primarily a consequence of decline in tomato prices. As per the Department of Consumer Affairs, tomato prices fell 17% on month, while that of potato and onion rose by 1% and 4%, respectively.
Edible oil prices rose about 5-6% on month in November, while pulses’ prices increased marginally by around 1%. Cereals prices (rice and wheat) remained largely unchanged. Dhiraj Nim, economist, ANZ Research said: “As fresh crop arrival has picked up, food prices will likely fall further, bringing down inflation.”
Core inflation, meanwhile, is expected to inch up to 3.8% in November from 3.7% in October. Economists say core inflation is likely to increase up to 4% in the next three months, as commodity prices are rising.
The Reserve Bank of India’s (RBI) December monetary policy statement said that “businesses expect pressures from input costs to remain elevated and growth in selling prices to accelerate from Q4FY25”.
Analysts say that the outlook for food inflation remains positive, with good Kharif production as per initial estimates. “Prospects for Rabi sowing remain conducive with healthy reservoir levels and good soil moisture from prolonged monsoons. As a result, we remain hopeful that inflationary pressures within the food basket should ease with the arrival of fresh harvests,” said Sarbartho Mukherjee, Senior Economist, CareEdge Ratings. For FY25, Mukherjee expects CPI inflation at 4.8%.
Source: The Financial Express
Restoring Inflation-Growth Balance Most Important Priority For RBI: Shaktikanta Das 