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Retail Inflation Dips Below 6% in November for First Time in 11 Months

Strategic Insights

— 2 min read

Retail inflation in India dipped below 6% for the first time in 11 months in November, coming in at 5.88%, largely due to a sharp deceleration in food prices, particularly of vegetables and edible oils. However, a spike in cereal prices remains a concern. The Reserve Bank of India's (RBI) hawkish tone in its last policy statement suggests that the central bank's monetary policy committee (MPC) may push ahead with an anticipated increase in interest rates in February. Analysts believe that inflation will continue to moderate into the target range, most likely in early 2023.

Key Takeaways:

  • Retail inflation in November dipped to 5.88%, the first time in 11 months it has fallen below 6%.
  • Food prices, particularly of vegetables and edible oils, decelerated sharply, contributing to the fall in inflation.
  • Core inflation remained sticky at 6.1%, and a spike in cereal prices is a matter of concern.
  • RBI expects inflation to be at 5% in the first quarter of the next financial year, 2023-24.
  • Factory output data for October showed a contraction of 4%, indicating that GDP growth for this quarter could be below RBI's estimate of 4.4%.
  • Most sectors saw a contraction, with consumer durables and non-durables recording a contraction in the mid-double digits, suggesting a slowing in demand.
  • RBI's hawkish tone in its last policy statement suggests that the MPC may push ahead with an anticipated increase in interest rates in February.
  • Analysts, including Rahul Bajoria, MD & head of EM Asia (Ex-China) Economics, Barclays, expect inflation to continue to moderate into the target range, most likely in early 2023.

Statistics:

  • Retail inflation in India dipped to 5.88% in November.
  • Food prices decelerated sharply, with prices of vegetables and edible oils falling.
  • Core inflation remained sticky at 6.1%.
  • RBI expects inflation to be at 5% in the first quarter of the next financial year, 2023-24.
  • Factory output data for October showed a contraction of 4%.
  • Most sectors saw a contraction, with consumer durables and non-durables recording a contraction in the mid-double digits.
  • The RBI has increased interest rates by 2.25 percentage points since May to 6.25%.

Sources:

  • "Retail inflation dips below 6% for first time in 11 months". The Hindustan Times, December 12.
  • "Factory output contraction: Key sectors slow down". The Hindustan Times, December 12.
  • RBI Act.
  • RBI's latest credit policy statement.
  • Pankaj Chaudhary, Union minister of state for finance. Written response in Parliament, December 12.
  • Shaktikanta Das, RBI Governor. Speech at the Hindustan Times Leadership Summit, November 12.

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