The retail inflation in November has quickened from 4.87 per cent in October to 5.55 per cent in November this fiscal. However, the overall inflation number at 5.5 per cent in November is lesser than 5.88 per cent in the same month last year. The retail inflation is the highest in the last three months since August, and the inflation print in November was lower than the estimated inflation by economists at 5.8 per cent.  “CPI Inflation for November 23 at 5.55 per cent has been largely in line with our forecast which stood at 5.40 per cent YoY. While this has been significantly higher than the 4.87 per cent print of October 23, it is somewhat lower than the expectations of many economists. Clearly, the prime driver of the pickup in inflation is food inflation which rose to 8.7 per cent YoY,” Suman Chawdhury, Chief Economist and Head – Research, Acuité Ratings & Research said. 

As per the data release, the rural inflation was a bit on a higher side when compared to the urban inflation. The rural inflation in November stands at 5.85 per cent, higher than urban inflation at 5.26 per cent. Comparing the rural and urban inflation sequentially, both rural and urban inflation has inched up further in November. In October, the rural inflation stood at 5.12 per cent and urban inflation stood at 4.62 per cent. Although headline inflation remained within the Reserve Bank of India's (RBI) tolerance range of 2-6 per cent for the third month in a row, it has now been above the medium-term target of 4 per cent for 50 consecutive months. 

Food inflation has been the biggest driver of inflation in November as per the economists’ expectations. The month-on-month data on inflation shows that vegetable prices shot up the most, followed by eggs, and cereals. Food inflation in November went up from 6.6 per cent to 8.7 per cent. The cereal inflation stood at 10.27 per cent, vegetable inflation stood at 17.70 per cent, and pulses inflation in November stood at 20.23 per cent. 

“Vegetable inflation, as suspected, has again moved up to 17.7 per cent due to the resurgence of prices of onions and tomatoes. What is worrying is the 20.2 per cent YoY and 1.6 per cent. Month-on-month in pulses inflation on November 23 since pulses are a staple diet for a large part of the Indian population. While cereal inflation has continued to be high at 10.3 per cent YoY, fruit inflation has climbed to 10.9 per cent YoY,” Chawdhary said. 

According to Chawdhary, the drop in core inflation to around 4.1 per cent and nearer to the RBI-MPC target of headline inflation is surely a matter of comfort. This suggests that food inflation is yet to push up inflation expectations higher so far. Concurring with Chawdhary, Vivek Rathi, National Director Research, Knight Frank India also said that the core inflation has notably softened to 4 per cent, and a moderation has also been witnessed in fuel prices. “Going forward, there would be an uptick in consumer headline inflation, however, there will be volatile food prices. Broadly, the inflation has moderated, thus would provide the RBI to keep the repo rate unchanged for a while now,” Rathi said. The food inflation is expected to go even further going ahead. The RBI in its post monetary policy conference also highlighted the apex bank’s priority of keeping a check on inflation.  “Food inflation accelerated sharply led by double-digit inflation in vegetables, pulses and fruits. Some easing in cereals, milk and a deeper deflation in edible oils curbed the rise in food inflation,” Dharamkirti Joshi, Chief Economist, CRISIL said. 

The clear message from the RBI Governor Shaktikanta Das was that the RBI can’t afford to keep its eyes off inflation. He also said that inflation data over the past few months should not instil a sense of complacency as the battle against inflation is still on.  It's not only the RBI who cautioned against being complacent, other central banks across the world also made it clear that the battle to tame the inflation and to bring it under the tolerance limits is still on and all need to be vigilant of how the food inflation is panning out going forward. 

“On the non-food front, fuel and light prices declined at a faster pace than in October. Core inflation eased a touch to 4.1 per cent. The moderation in core inflation reflects lower input cost pressures on producers, which has reduced the need to raise retail prices,” Joshi said. “We expect moderation in Q3FY24 real GDP growth and inflation to remain nearly 5.2 per cent YoY in 4QFY24. The RBI, thus, doesn't need to think about easing at all and keep monetary policy unchanged in the coming months,” Nikhil Gupta, Chief Economist, Motilal Oswal Financial Services  said.