More Stories

Informist, Thursday, Dec. 5, 2024

By Shubham Rana

 
NEW DELHI – India's headline retail inflation rate likely moderated to 5.6% in November from October's 14-month high of 6.21%, thanks to a decline in vegetable prices, particularly tomato, according to an Informist poll of 14 economists. CPI inflation stood at 5.55% in November 2023.

The statistics ministry will release CPI data for November at 1600 IST on Dec. 12.

If inflation falls in November, it would be after a gap of three months. In those three months, especially in the latter two, inflation surged by more than 250 basis points and crossed the upper-bound of the Reserve Bank of India's tolerance band of 2-6% after more than a year, first driven by an unfavourable base and then by a jump in food prices.

Food prices are broadly seen lower in November, pulled down by a near 17% month-on-month fall in that of tomato, according to data from the Department of Consumer Affairs. However, retail prices of onion and potato in November were up 3.8% and 1.3% on month, respectively. Prices of other food items, such as wheat and edible oils, also trended up last month. While wheat prices were 1.8% higher sequentially, edible oil prices were up 1.9-5.7% from October. According to Teresa John, economist at Nirmal Bang Institutional Equities, food and beverage inflation may have cooled to 8.7% in November from a 15-month high of 9.69% in October.

Core inflation, which excludes food and fuel items, in November is expected to have remained close to October's 10-month high print of 3.7%.

MONETARY POLICY IMPLICATIONS

Before the CPI data is released next week, the RBI's Monetary Policy Committee will on Friday announce its interest rate decision. Most economists expect the repo rate to be left unchanged at 6.50% for the 11th meeting in a row despite the disastrous Jul-Sept GDP growth print of 5.4% released last week raising concerns about the state of India’s economic growth.

While a weaker-than-expected growth has led to calls for the loosening of monetary policy, inflation is the central bank's primary objective, with Governor Shaktikanta Das having pushed back against expectations of an interest rate cut this week, saying it would be risky and premature to reduce the repo rate at the current juncture.

At its October meeting, the MPC had relaxed its stance to neutral from withdrawal of accommodation, sparking hopes of a rate cut in December. However, Das' comments, which followed a sharp increase in inflation in September, put those hopes to bed, before they were somewhat revived by the poor GDP numbers.

According to Nomura economists Sonal Varma and Aurodeep Nandi, the fall in growth in Jul-Sept to a seven-quarter low of 5.4% is a "major setback, even relative to our more cautious expectations".

"Early data for October-November suggest some sequential rebound in activity, but a tepid one, and our leading indicators are lower in Q4 FY25 (Jan-Mar), indicating that the economy remains in the midst of a cyclical growth slowdown... This suggests that GDP growth has already moderated below trend, and should mean placing a higher weight on the growth objective of the mandate," Varma and Nandi said in a note Wednesday. Nomura is in the minority with its call of a 25-bps reduction in the repo rate to 6.25% on Friday.

As per the RBI's latest forecasts, CPI inflation and GDP growth are seen averaging 4.8% and 7.4%, respectively, in Oct-Dec. Both these numbers are expected to be revised on Friday, with inflation seen higher and growth lower.

The following is a summary of the poll on CPI inflation in November:

Range of expectations: 5.0-6.0%

Mean: 5.6%

Median: 5.6%

Mode: 5.5%

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Akul Nishant Akhoury

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.