India's CPI Inflation Rises To Three-Month High At 5.55% In November

Consumer price inflation remains within the central bank's tolerance band of 4 (+/- 2)% for the third straight month.

<div class="paragraphs"><p>(Source: Unsplash)</p></div>
(Source: Unsplash)

India's retail inflation picked up in November, led by a rise in the prices of vegetables and pulses, but stayed within the central bank's tolerance band.

The Consumer Price Index-based inflation stood at 5.55% in November as compared with 4.87% in October, according to data from the Ministry of Statistics and Programme Implementation released on Tuesday.

A panel of economists polled by Bloomberg had estimated a reading of 5.78% for November.

Consumer price inflation remains within the central bank's tolerance band of 4 (+/- 2)% for the third straight month.

Food and beverage inflation rose to 8.02% in November, as compared with 6.24% in October.

CPI ex-vegetables was at a 46-month low of 4.7% in November, according to Nikhil Gupta, chief economist at Motilal Oswal Financial Services Group.

The spike in certain vegetable prices along with an unfavourable base has sent the November CPI inflation print to a three-month high, said Rajani Sinha, chief economist at CareEdge. The upside was contained, to some extent, with a continued deflation in fuel and light category and a moderation in core inflation, she said.

Persistently elevated inflation in certain food categories such as cereals and pulses pose a risk of potential generalisation of price pressures, Sinha said.

Given the lingering uncertainty around Kharif production and Rabi sowing prospects, high food prices cannot be shrugged off as entirely transient and could feed into the inflationary expectations, she said.

"Hence, the supply-side interventions by the government become crucial at this juncture to ensure sufficient buffer stock of essential food items."

Inflation Internals 

  • Cereal prices rose 10.27% in November as against 10.65% in October.

  • Inflation in meat and fish was at 2.15%, up from 3.27% in the previous month.

  • Inflation in eggs was at 5.9%, up from 9.3% in the previous month.

  • Inflation in milk and milk products was at 5.75%, as compared with 6.4%.

  • Prices of oils and fats declined 15.03%, after falling by 13.73% last month.

  • Vegetable prices rose 17.7%, as compared with 2.7%.

  • Pulses inflation was at 20.23%, as against 18.79%.

  • Clothing and footwear inflation was at 3.9% versus 4.3%.

  • Housing inflation was at 3.55%, as compared with 3.8%.

  • Fuel and light inflation fell by 0.77%, as against 0.4%.

Set For Further Rise 

The December CPI inflation estimate is tracking at 6.2% to 6.4%, as base-effect turns adverse, said Gaura Sen Gupta, India economist at IDFC First Bank Ltd.

High frequency food prices in the first two weeks of December show that vegetable prices have moderated, reflecting improved supply dynamics. That said, the moderation is much lesser than the usual winter season decline, she said.

The key risk to inflation outlook remains from food inflation due to the uneven monsoon performance and low reservoir levels, said Sen Gupta, forecasting retail inflation at 5.4% for the full fiscal.

The moderation in core inflation and decline in inflation expectations indicates that generalisation of price pressure has not taken place, she said.

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