India’s November retail inflation sees a surge to 4.91%

This is the offsetting effect of a cut in fuel taxes, data released by the statistics department on Monday showed

December 14, 2021

Retail inflation rises to 4.9% in November

Official data showed that India’s November retail inflation surged on a sequential basis and the reason behind it is the higher food prices, as well as the rising commodity costs. Despite the rise, retail inflation remained well within the range of the Reserve Bank of India‘s set target of 2-6 percent.

The data revealed by the National Statistical Office shows that the Consumer Price Index (CPI) inflation jumped to a three-month high of 4.9 percent which was led by higher core inflation. The inflation inched up to 4.91 percent last month from 4.48 percent in October 2021.

This is the offsetting effect of a cut in fuel taxes. A Reuters survey of economists expected inflation to be higher at 5.10%. However, on a YoY basis, the rise in last month’s retail inflation was lower than the 6.93 percent rise recorded for November 2020.

As per the NSO data, the rate of rising in the Consumer Food Price Index increased to 1.87 percent last month from 0.85 percent in October. Food prices, which contribute to nearly half of CPI, rose 1.87% in November from 0.85% in the previous month, the data showed. On the other hand, vegetable prices declined by 13.62 percent.

In terms of CPI YoY inflation rate, pulses and products’ prices jumped by 3.18 percent in November 2021. Besides, meat and fish prices rose by 5.55 percent, however, eggs became cheaper by 1.31 percent, nevertheless, the overall price of the food and beverages category was up 2.60 percent and oils and fats prices rose 29.67 percent.

Furthermore, as per the official data, the inflation rate for fuel and light was at 13.35 percent. In addition, the sub-group of clothing and footwear showed a price acceleration of 7.94 percent.

ICRA‘s Chief Economist Aditi Nayar said: “With input price pressures forcing producers to raise prices in many sectors, the November 2021 CPI inflation accelerated slightly faster than we had expected, shrugging off the favourable base effect and the cut in fuel taxes.

“A moderation in the CPI inflation for fuel and light, pan, tobacco and intoxicants, and miscellaneous items was outpaced by the rise in the inflation for food and beverages, housing, and clothing and footwear.”

Emkay Global Financial Services Lead Economist Madhavi Arora said: “Going ahead, we remain watchful of various inflation push and pull such as excise cut-led fall in the fuel price hike, telecom tariff hike, volatility in vegetable prices, correction in global commodity prices and early signs of easing supply chains globally.

“Besides, the base effect will start getting unfavourable in coming months, and the headline may even fiddle with 6 percent-plus print. We also remain watchful of the pass-through of impending cost-push pressures in core goods inflation and cost-push via imported energy inflation, while re-opening-led ensuing demand revival in select contact-sensitive household services could pressure core services inflation ahead.”

India Ratings & Research Chief Economist Devendra Kumar Pant said: “Excise relief on petrol and diesel and cut in VAT by most state governments have not provided much relief to retail inflation. Inflation of both ‘transport and communications’ and fuel and light’ declined in November 2021, however, remained double-digit.

“India Ratings has been suggesting that the inflation of commodities such as health, fuel and light, and transport and communications has turned structural.”

[With Inputs from IANS]

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