CPI Preview: Inflation Expected To Ease In November
Core inflation is expected to remain benign at 3.62% in November 2024 vs. 3.67% in October 2024.
India's retail inflation is likely to see some easing in November after having risen above the central bank's upper tolerance level in October.
The Consumer Price Index-based inflation is projected to rise by 5.5% in November, according to a median forecast of economists polled by Bloomberg. This is after it came in at 6.2% in October, exceeding the central bank's upper tolerance level of 4(+/-2)%, with the consumer food price index showing double digit growth of 10.87%.
CPI inflation in November 2024 is seen moderating to 5.75% in November 2024 largely led by moderation in vegetable prices, according to Teresa John, economist at Nirmal Bang Institutional Equities.
In key vegetables, for the month of November, while prices of onions and tomatoes saw a fall on an annual basis, potato prices rose, according to data from the Ministry of Consumer Affairs.
Along with a decline in onion prices, for tomato as well, the mandi arrival statistics showed a jump of 46% in November 2024 compared to November 2023, stated a research note by the Bank of Baroda.
Wholesale prices of TOP items (Tomatoes, Onions, Potatoes) are also on the deflationary path. Thus, retail prices are likely to exhibit further downward correction in the near term, said the note. Dipanwita Mazumdar, economist at the Bank of Baroda, forecasts retail inflation at 5% for November.
Core inflation is expected to remain benign at 3.62% in November 2024 vs. 3.67% in October 2024 supported by lower gold prices, John estimates. Prices of energy, precious metals, fertilisers are also on a downtrend, so no major cost push inflation is expected, Mazumdar also said, adding that international prices of edible oils and cereals are also largely contained. "This coupled with the arrival of fresh winter harvest will in turn lend comfort to headline CPI in the near term."
Going forward, food inflation is likely to soften in the next quarter with seasonal easing of vegetables prices and kharif harvest arrivals, along with expectations of strong rabi production, according to RBI's expectations. The RBI revised its CPI inflation projection to 4.8% from 4.5% for the financial year, with Q3 forecast at 5.7%, up from 4.8% earlier, and Q4 at 4.5%, up from 4.2%, as per the latest estimates.
