Retail inflation moderates to an 11-month low of 5.9% in November

NEW DELHI: Retail inflation eased to 11-month low in November on the back of food price moderation and a favorable base effect, bringing much-needed relief from stubborn price pressures and sparking rate hike prospects less aggressive interest rates in the months to come.
The data released by National Statistical Office (NSO) on Monday showed that retail inflation, as measured by the consumer price index (CPI), rose 5.9% annually in November, slower than October’s 6.8% and higher than 4, 9% of November last year. The food price index fell to 4.7% for the month from 7% in October. Rural inflation was higher at 6.1%, while urban inflation was 5.7%.


Retail inflation has fallen below the Reserve Bank of India’s upper tolerance range of 6% after 10 months. The finance ministry said the government’s measures to contain food prices helped bring inflation below the central bank’s tolerance limit. In a series of tweets, the ministry said the impact of trade-related measures to reduce the prices of grains, pulses and edible oils is expected to be felt more significantly in the coming months.
“Taking into account different thrusts and pressures, we expect overall CPI inflation to fall to the downside for the remainder of FY23. The December ’22 CPI inflation reading could see further downside due to positive food seasonality along with that of home prices for fiscal year 23, our expectations are in line with RBIFiscal year 2023 projected CPI inflation of 6.7%,” thinks economics QuantEco Research said. “From a monetary policy perspective, in our recent post-policy report we called for a likely 25 basis point hike in the repo rate in Feb ’23, followed by a pause. Today’s stronger-than-expected decline in inflation further strengthens our view that room for further aggressive tightening may be limited by the resurgence of growth risks and the likelihood of a strong disinflationary trend in non-core inflation, already in course,” according to QuantEco’s note.
Separate data showed a contraction in industrial production in October on the back of a decline in the key manufacturing sector. Capital goods, durable and non-durable consumer goods also contracted.
Data released on Monday by the NSO showed the industrial production index (IIP) contracted by 4% in October, compared with an upwardly revised 3.5% expansion in September and below growth of 4 .2% over the prior year period. The manufacturing sector contracted by 5.6% in October compared to a 3.3% expansion last October.
“It is certain that the global slowdown will weigh significantly on the industrial outlook next year, as aggressive rate hikes and high inflation hit growth in advanced economies. The recovery in domestic demand has been uneven,” he said DK Joshichief economist of Crisil.


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