India inflation likely rose to 5.8% in November: Mint poll

Retail inflation fell to a four-month low of 4.87% in October as food prices eased. (Photo: Bloomberg)
Retail inflation fell to a four-month low of 4.87% in October as food prices eased. (Photo: Bloomberg)

Summary

  • Inflation in November and December is projected to be high, around 6%, reversing the trend of easing seen over the previous three months

New Delhi: India’s retail inflation likely rose to 5.8% in November from 4.9% in October, according to a Mint poll of 23 economists. The increase could be due to higher prices of vegetables and cereals, signalling a departure from the previous three months of easing. Official data is set to be released at 5.30 pm on Tuesday.

The poll predicts November consumer price inflation to fall within the range of 5.3-6.3%. Five economists expect inflation to reach or surpass 6%, the upper limit of the Reserve Bank of India’s acceptable inflation range. Two warned of downside risks to their forecasts due to a late correction in vegetable and pulse prices.

“The rise will be driven primarily by higher food inflation, where the rise in vegetable prices (onions and tomatoes) and persistence in a few non-perishable items (pulses, in particular) will likely pressure the headline," said Rahul Bajoria, economist at Barclays, in a report dated 6 December.

RBI governor Shaktikanta Das said at the most recent monetary policy meeting that an increase in key vegetable prices may push retail inflation higher in the near term, predicting an average of 5.6% in the October-December quarter.

If the poll prediction for November comes true, and if the RBI’s projection of 5.6% for the full quarter is also correct, the December inflation will rise to 6.1%, Mint calculations show.

“We expect CPI inflation to rise above the MPC’s 6% threshold in December, before slipping back below 6% in January as food inflation cools with the arrival of fresh produce," said Anubhuti Sahay, economist at Standard Chartered Bank.

“We expect a prolonged rate pause following a balanced MPC statement in December, with a shallow 50-basis-point rate-cutting cycle starting in June 2024," Sahay added.

Economists at Barclays expect core inflation, which excludes volatile items such as food and fuel, to have remained stable in November, supporting the RBI’s decision to keep policy rates unchanged at its December meeting.

 

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