CPI Inflation Shows Signs Of Easing In November 
Customers transport vegetables from the Ghazipur Wholesale Fruit and Vegetable Market in New Delhi, India, on Wednesday, June 24, 2020. Photographer: Prashanth Vishwanathan/Bloomberg

CPI Inflation Shows Signs Of Easing In November 

Retail inflation showed signs of easing in November, led by easing prices of some food items.

Consumer Price Index inflation stood at 6.93% in November 2020 compared to 7.61% in October, according to data released by the Ministry of Statistics and Program Implementation on Monday. The rise in prices in October had been the sharpest since May 2014.

Inflation in food and beverages dropped to 8.76% in November, compared to 10.16% in the previous month. However, core inflation rose further to the highest in nearly two years at 5.51% in November compared to 5.46% in October.

A Bloomberg poll of economists had estimated inflation at 7.2% for November 2020.

At the current level, inflation remains above the Monetary Policy Committee’s target of 4 (+/-2)%. The committee, however, has guided towards an accommodative policy stance into next financial year as it looks to support growth.

A mild reversal in food prices along with favourable base effects made inflation fall slightly in November, said Rahul Bajoria, chief India economist at Barclays.

While pressures on perishable food prices appear to be reversing, which should have a greater downward impact on inflation, several factors, such as higher operational and labour costs, and rising energy costs will likely prevent a large drop in inflation over the next three to six months.
Rahul Bajoria, chief India economist, Barclays

Inflation Internals

  • Vegetable inflation fell to 15.63% in November compared to 22.5% in October.

  • Inflation in the pulses category was at 17.91% compared to 18.34% last month.

  • Inflation in the meat segment eased to 16.67% from 18.7% last month.

  • Clothing and footwear inflation was at 3.3% compared to 3.17% in October.

  • Housing inflation stood at 3.19% against a rise of 3.27% last month.

  • Fuel and light inflation stood at 1.9% compared to 2.28% last month.

  • Household goods and services inflation stood at 2.96% compared to 2.83% in October.

  • Health inflation rose by 5.54% compared to a 5.22% a month ago.

  • Transport inflation was steady at 11.06% compared to 11.16% last month.

  • Inflation in personal care eased marginally to 11.97% in November compared to 12.07% in October.

While prices of onions and tomatoes eased, prices of potatoes continued to surge, rising by 107.1% in November, compared with an increase of 104.6% last month. On a sequential basis, food and beverages index continued to rise, standing at 165.2 in November compared to 164.7 last month. Vegetables, pulses and oils also continued to climb sequentially.

While the prices of vegetables like onions and potatoes remain elevated, the sub-indices show that other vegetable prices corrected significantly in November, said Bajoria. “We are seeing more signs that prices of key perishable vegetables continue to correct, and this will likely be a key disinflationary source in December.”

Core Inflation Continues To Climb

Even as prices of food items eased, core inflation, which excludes volatile food and fuel categories, rose to the highest since December 2018, according to data from Bloomberg. Airfare inflation, too, remained high, rising to 143.36% compared with 130.09% in October.

Core inflation and core-core inflation—non-food, non-energy and transport and communication—are broadly stable in the range of 5-5.79% and 4.7-4.95%, respectively, since May 2020, Sunil Kumar Sinha, principal economist at India Ratings, said. Bajoria said the limited demand-side inflationary impulse in the economy will keep a lid on core inflation in coming quarters, Bajoria said.

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