CPI Inflation Rises To A Three-Month High In November
Retail inflation picked up in November despite excise duty cuts on fuel. The rise was led by vegetable prices which increased because of unseasonal rainfall.
Consumer Price Index inflation stood at 4.91% in November compared with 4.48% in October, according to data released by the Ministry of Statistics and Program Implementation on Monday. It remained within the Monetary Policy Committee's target range of 4(+/-2)%.
A Bloomberg poll of 25 economists had estimated inflation at 5.1% for November. A strong base effect has partly helped bring down the headline inflation even as input cost pressures persist.
Food and beverage inflation rose to 2.6% in November compared to 1.8% in October.
"A moderation in the CPI inflation for fuel and light, pan, tobacco and intoxicants, and miscellaneous items was outpaced by the rise in the inflation for food and beverages, housing, and clothing and footwear," said Aditi Nayar, chief economist at ICRA.
The sequential growth is material at 0.73% but it is not at a level that should lead to undue concerns, said Suman Chowdhury, chief analytical officer at Acuité Ratings. Food inflation rose 1.2% month-on-month, mainly driven by the volatility in vegetable prices, which rose 7.4% month-on-month, he said.
Inflation Internals (Year-On-Year)
Inflation in oils and fats was at 29.7% in November compared with 33.5% on an annual basis in October 2021.
Vegetable prices were 13.6% below a year ago. In October, prices were running 19.4% lower than last year.
Clothing and footwear inflation was at 7.9% compared with 7.5% last month.
Housing inflation stood at 3.7%, compared with 3.5% in the previous month.
Fuel and light inflation stood at 13.4%, compared with 14.4% last month.
Inflation in transport and communication was at 10%, compared with 10.9% in October.
Inflation in categories such as health, fuel and light, and transport and communications has turned structural, said Devendra Pant, chief economist at India Ratings & Research. Pant sees CPI inflation remain high till January 2022 and moderate after that, Pant added.
Supply shortages are further aiding to higher inflation, which cannot be termed as transitory.Devendra Kumar Pant, Chief Economist, India Ratings & Research
Key Vegetables And Fruits
Prices of all three key vegetables — potatoes, onions and tomatoes, rose on a sequential basis.
Potato prices rose by 16.1% in November on a monthly basis, compared to a rise of 9.4% in October.
Rise in onion prices was more modest at 4.2% on a monthly basis, after prices rose by 27% in October.
Tomatoes continued to see the sharpest jump, with prices rising by 29.7% from the previous month. This was after prices rose by 57% on a monthly basis in October.
Prices of some of the key vegetables, however, have corrected in December, providing relief.
"The recent correction in prices of many food items other than tomatoes, has provided relief for the inflation trajectory, especially given the unfavourable base effects that lie ahead," said Nayar. "In our assessment, as long as the CPI inflation remains within the target of 2-6%, the MPC and RBI will prefer to prioritize growth."