November CPI Preview: India's Retail Inflation Seen Marginally Higher After Record Low Print

India's retail inflation is expected to rise marginally in November, due to a low-base effect and narrowing food deflation, but remain way below the Reserve Bank of India's comfort level. The Ministry of Statistics will release the data on Friday, 5:00 p.m.

The Consumer Price Index-based inflation likely rose to 0.7% in November, according to a median forecast of economists polled by Bloomberg.

The CPI was 0.25% in October, the lowest-ever recorded by the government. The November 2024 retail inflation stood at 5.48%, down from 6.2% the preceding month.

The marginal rise in November could be attributed to base effect fading on food prices, which fell by 5.02% the previous month. Food constitutes the biggest portion in CPI.

Retail inflation will remain well below the RBI's 2%–6% band target for a third straight month and a second consecutive quarter. The central bank has slashed its inflation forecast in the current fiscal to 2% from 2.6% earlier.

Core inflation, which strips out price change in volatile items like food and fuel, is expected to remain unchanged at a multi-year high of 4.5%, due to high international gold prices.

Food inflation will continues to decline, driven by a sharp fall in tomato, onion, potato (TOP) prices. Favourable production and mandi arrivals has surged on a year-on-year basis, supporting lower prices, according to Bank of Baroda economist Dipanwita Mazumdar, who projects CPI at 0.9% in November.

Moreover, the impact of GST rate cut was visible in majority of the items in October CPI print which saw a sequential drop in prices of most of the food items. The trend is likely to persist in November as well.

"The food driven downward spiral will continue to undershoot CPI below the lower band of monetary policy target... The gap between retail and wholesale prices for tomato and potato is still comparatively higher than historical average, thus it indicates that some pass-through of lower wholesale prices will still be visible in retail print," she said in a note.