Retail Inflation Likely To Rise In November: Report
As the Reserve Bank of India (RBI) is set to announce November”s Consumer Price Index (CPI)-based inflation today (November 12), a poll conducted by MoneyControl predicted inflation to rise up to the upper band of the Reserve Bank of India”s (RBI) tolerence level, i.e., 2–6%. The survey expects retail inflation to hit 5.8 percent in November, way higher than the 4.87 percent print in October.
The economists who participated in the survey attributed the inflation rate to a volatile price hike and an unfavorable base effect.Earlier, RBI governor Shakthikanta Das had forecast high inflation, denoting that inflation management “cannot be on auto-pilot.”.
“The future path is expected to be clouded by uncertain food prices. CPI data for November is expected to be high,” Das said last week while announcing the Monetary Policy Committee”s decision to keep interest rates at 6.5% for the fifth meeting in a row. One basis point is one-hundredth of a percentage point.
14 Out of 15 economists representing various organizations polled by Moneycontrol, predicted galloping inflation with Societe Generale at 5.3%, IndusInd Bank at 5.53%, ICRA at 5.6%, DAM Capital Advisors at 5.67%, IDFC First Bank at 5.7%, Sunidhi Securities at 5.7%, Deutsche Bank at 5.78%, QuantEco Research 5.78%, Emkay Global Financial Services 5.8%, HDFC Bank 5.9%, Motilal Oswal Financial Services 5.9%, State Bank of India 6.01%, Barclays 6.15%, and L&T Finance 6.24%.
However, Piramal Enterprises”s Debopam Chaudhuri foresees relatively stable inflation at 4.85 percent due to the relented food inflation. The high discounts provided by retailers over the festival period will also play a crucial role in curing inflation, Chaudhuri said. Data from the Department of Consumer Affairs provides another picture, with tomato prices rising by 50 percent and onion prices rising by 58 percent.
An unfavorable base effect also points to higher inflation, given that inflation in November 2022, which is taken as the base period to gauge last month”s inflation number, was down by 0.1 percent MoM (month on month).
The RBI anticipates increased inflation in November and December. “Unless vegetable prices decline sharply, CPI inflation will likely stay around similar levels in December as well, but thereafter will moderate to a 5.0 average in January–March 2024 as new crops arrive at the market,” said Kaushik Das, Deutsche Bank”s chief economist for India and South Asia.
In July, retail inflation witnessed a significant jump to 7.44 percent due to high vegetable prices, especially tomato prices.
