Spike In Food Prices Take India’s Retail Inflation To 3-Month High; Here’s What Experts Have To Say

New Delhi [India] : Retail inflation in India rose at its fastest pace in three months in November, largely due to a spike in food prices.

The retail inflation or Consumer Price Index in November was 5.55 per cent. The October consumer price index (CPI) was at 4.87 per cent and 5.02 per cent in September.

The retail inflation in India though is in RBI’s 2-6 per cent comfort level but is above the ideal 4 per cent scenario.

Food inflation, which accounts for nearly half of the overall consumer price basket, was 8.70 per cent in November, against 6.61 per cent reported the previous month.

Prices of cereals rose by 10.27 per cent and vegetables by 17.7 per cent in November on a year-on-year basis. Pulses were up by 20.23 per cent, spices by 21.55 per cent and fruit prices were up 10.95 per cent last month, official data released by the Ministry of Statistics and Programme Implementation showed.

The higher month-on-month retail inflation comes close on the heels of RBI having maintained the status quo in the repo rate for the fifth straight occasion, besides flagging concerns on the inflation outlook.

Barring the recent pauses, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.

Following are some of the excerpts of views from analysts and experts on the November retail inflation numbers:

Dharmakirti Joshi, Chief Economist, CRISIL:

We expect the Reserve Bank of India (RBI) to closely monitor inflation as it remains above the Monetary Policy Committee’s (MPC) long-term target of 4 per cent. In our base case, we expect CPI inflation to average 5.5 per cent this fiscal and foresee the RBI holding interest rates steady for the remainder of this fiscal.

Rajani Sinha, Chief Economist, CareEdge Ratings:

An unfavourable base is further expected to push CPI inflation higher around 5.8-6 per cent in December. However, with the arrival of fresh crops in the market during January-March, the headline inflation could ease to 5.1 per cent by the fiscal year end. For the full fiscal year, we expect inflation to average at 5.4 per cent with risks tilted to the upside.

Vivek Rathi, National Director Research, Knight Frank India:

Going forward, there will be an uptick in consumer headline inflation, however, will be volatile food prices. Broadly, the inflation has moderated, thus providing the RBI to keep the repo rate unchanged for a while now.