Retail inflation eases to 5.48% in November from 6.21% in October

Consumer inflation for November

India’s retail inflation eased to 5.5 percent in November, easing from a 14-month high of 6.2 percent in the previous month, as food prices cooled off.

Food inflation had eased to 9 percent for the month compared with 10.9 percent in October.

The November reading was in line with the Moneycontrol poll median of 5.5 percent from 15 forecasts.

Consumer prices have remained above 5 percent for a third consecutive month.

High inflation was one of the reasons for the monetary policy committee to advocate for no change in the policy rate for the eleventh consecutive time at its meeting in December.

Experts indicate that the print is likely to make the call tough for the central bank, as December reading is also expected to be over 5 percent.

"With such high inflation it would be a hard call to take on rates in February when there will be available on more inflation point for December which is likely to be above 5 percent," said Madan Sabnavis, chief economist, Bank of Baroda.

"December 2024 inflation at around 5.4 percent will translate in 3QFY25 inflation to be in line with RBI’s forecast. A higher base effect of pulses, fruits, vegetables and spices inflation will be helpful in further decline in inflation in December 2024, which we expect to be around 5 percent. However, edible oils and personal care & effects may pose some challenge," added Paras Jasrai, senior analyst, India Ratings and Research.

Core inflation in November 2024 was largely flat 3.6 percent in November.

"The demand conditions in November 2024 have remained similar to October 2024 and expected to remain similar in December 2024 also," Jasrai noted.

The exceptionally high print for October did move the RBI to reconsider its stance on inflation, as it raised the forecast 0.3 percentage points to 4.8 percent from 4.5 percent projected earlier.

India’s consumer inflation is likely to show signs of further cooling off from January.

Asian Development Bank, in its latest economic outlook, projected inflation to fall further to 4.3 percent in FY26 from 4.5 percent projected in the September edition.

Food bites

Even though food inflation eased from a 15-month high of 10.9 percent in October to 9 percent in December, some of the categories remained in double digits.

Potato inflation was a high 66.6 percent in November compared with 64.9 percent in the previous month, and carrot was 33.4 percent compared with 22.8 percent.

Garlic inflation was still high over 80 percent, while some of the pulses were also trending over 20 percent.

In the core category, personal care and effects inflation remained in double digits owing to higher gold and silver prices.

Experts indicate that better monsoon prospects are likely to help keep food inflation under control, giving the central bank's monetary policy committee support in its February meeting.

"If the headline CPI inflation eases to 5.0% or lower by December 2024, the likelihood of a rate cut by the MPC in its February 2025 meeting would be very high. We maintain our baseline expectation of two rate cuts of 25 bps each in the awaited rate cutting cycle," said Aditi Nayar, chief economist, Icra