Economy
Inflation likely eased to 5.5% in November: Mint poll
Summary
- If CPI inflation aligns with projections, the average for October-November would stand at 5.9%, slightly above the central bank’s revised forecast of 5.7% for the October-December quarter.
India’s retail inflation is expected to have eased to 5.5% in November from 6.2% the previous month, driven by a seasonal decline in vegetable prices, according to a Mint poll of 16 economists. Even if inflation moderated in November, it would still have exceeded the Reserve Bank of India's (RBI) medium-term target of 4% in all but two months since September 2019.
Economists in the survey estimated consumer price index (CPI) inflation to range between 5.3% and 6.0% for November. The official data is set to be released on 12 December.
India’s retail inflation climbed to a 14-month high of 6.21% in October, up from 5.49% the previous month.
“CPI for November took a breather from October highs and cooled down mainly on account of seasonal cooling off in vegetable prices even as edible oil prices continued their upward march," the Union Bank of India said in a note last week.
Vegetable inflation drove a sharp spike in overall inflation in October, with the print hitting a nearly five-year high of 42.2%. However, some relief is expected as tomato prices fell nearly 17% month-on-month in November, according to data from the Department of Consumer Affairs. Conversely, edible oil prices rose by 1.6–6.9% during the same period.
If CPI inflation aligns with projections, the average for October-November would stand at 5.9%, slightly above the central bank’s revised forecast of 5.7% for the October-December quarter. This suggests the expectation of further moderation in December inflation.
Last week, the Monetary Policy Committee (MPC) kept the repo rate unchanged but raised its inflation forecast for the current fiscal to 4.8%, up from 4.5%, citing October's unexpectedly high inflation print.
Simultaneously, weaker-than-expected GDP growth in the July-September quarter prompted a downward revision of the full-year growth forecast to 6.6% from 7.2%. This emerging dynamic of slowing growth and elevated inflation is likely to complicate the task for newly-appointed RBI governor Sanjay Malhotra.
Also read | Sanjay Malhotra to command last leg of RBI’s war on inflation
Economists anticipate the RBI may begin a rate-cutting cycle in its February meeting, driven by slowing growth and easing measures from the US Federal Reserve. This outlook is supported by expectations that seasonal price pressures will have subsided by then.
