CPI inflation hits 14-month high of 5.41% in November
NEW DELHI: Consumer inflation rose to a 14-month high in November while wholesale deflation narrowed in the month because of higher food inflation, effectively ruling out any further cut in interest rates in the current financial year, though experts said there was no cause for alarm. Retail inflation, as measured by the consumer price index, rose to 5.41 per cent in November, data released by the statistics office on Monday showed, higher than 5 per cent in the previous month but in line with the expectation of 5.4 per cent.
“Consumer “inflation expectedly inched up as waning base effect begins to show on data,” said Upasna Bhardwaj, economist, Kotak Mahindra Bank. “While prices of vegetable and pulses have started to ebb towards the end of November, upside pressures have been witnessed in oilseeds and sugar. We expect the uptrend to continue into the next quarter.” The separately released wholesale price index showed a deflation of 1.99 per cent, marking a 13th consecutive month of decline in wholesale prices, but the year-onyear fall in prices is getting less severe. Wholesale inflation was -3.81 per cent in October.
“Chances of any more monetary easing in this fiscal are almost zero,” said Devendra Kumar Pant, chief economist, India Ratings & Research, a Fitch Group company. The Reserve Bank of India did not cut rates in its December 1 monetary policy review after a sharper-than-expected 50 basis point cut in October.
A basis point is 0.01 percentage point. The rise in food inflation after two successive poor monsoons and the impact of the pay commission’s recommendations have emerged as inflation risks even as the global crude slide continues. The RBI is likely to watch these for a while before taking a call on any further easing to give a boost to growth that has shown some signs of picking up of late. India’s GDP expanded 7.4 per cent in the July-September quarter, better than 7 per cent in the previous quarter and industrial production growth climbed to a five-year high 9.8 per cent in October.
“The focus now shifts towards the glide path towards 5 per cent by end of FY2017, given the upside risks emanating from the seventh pay commission and the global risks,” Bhardwaj said. “Against these potential risks, we at best see scope for 25-50 bps cut through FY2017 as growth remains subdued.” The imminent interest rate rise in the US also remains a deterrent to the further softening of interest rates. The rupee depreciation has undermined some of the gains of the global slump in commodity prices.
“We continue to expect CPI inflation to undershoot the January 2016 target of 5.8 per cent that had been articulated by the RBI in its September 2015 policy statement,” said Aditi Nayar, chief economist at ratings agency ICRA. The rise in inflation was largely because of a spike in prices of some select food items that drove consumer food price inflation to 6.07 per cent in November from 5.25 per cent in October. Wholesale inflation in food articles saw a bigger spike, rising to 5.2 per cent in November compared with 2.44 per cent in October.
Read full article: Economic Times
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