New Delhi: With the significant easing of food prices, especially vegetables, India’s retail inflation slowed to 5.48 per cent in November as compared to 6.21 per cent in October. Though it breached the central bank's 6 per cent upper tolerance band, this is a sharp drop from the previous month, showing a positive sign of the economy. With the sign of easing food prices, industry experts are of the view that ‘green shoots’ are visible on the consumption front as food inflation has started receding and hopeful for a revival in consumption growth in the near future.
As per the data by National Statistics Office (NSO), the inflation in the food basket reduced to 9.04 per cent in November, while it was 10.87 per cent in October and 8.70 per cent in November 2023. “But the CPI-based headline inflation increased from an average of 3.6 per cent during July-August to 5.5 per cent in September and further to 6.2 per cent in October 2024, the highest in more than a year since September 2023,” the NSO data said.
“During the month of November 2024, a significant decline in inflation is observed in vegetables, pulses and products, sugar and confectionery, fruits, eggs, milk and products, spices, transport and communication and personal care and effects subgroups,” the NSO data said.
Earlier this month, the RBI kept interest rates steady but reduced the cash reserve ratio for banks to ease monetary conditions and support growth. The RBI also raised the inflation projection for the current fiscal to 4.8 per cent from 4.5 per cent, saying that the lingering food price pressures are likely to keep headline inflation elevated in the December quarter.
Outgoing RBI governor Shaktikanta Das also highlighted certain challenges confronting the Indian economy and the central bank, including the task of restoring growth-inflation balance and he was hopeful that the newly-appointed central bank governor Sanjay Malhotra would take it forward for the growth of the country's economy.
However, experts said that the recent moderation in vegetable prices attributed to a bumper summer crop supported by favourable monsoon rains, expecting that strong monsoon conditions, adequate reservoir levels, and higher minimum support prices are likely to boost winter crop production, further easing food inflation in the months ahead.
Newly appointed Ficci president Harsha V Agarwal also said that ‘green shoots’ are visible on the consumption, as food inflation has started receding. “Food inflation is expected to come down to its normal level in the next two quarters. I am hopeful for a revival in consumption growth, aided by a good crop and increased spending by the government on the big-ticket infra projects and rural schemes in the December quarter,” Agarwal said.
However, Aditi Nayar, chief economist of ICRA Limited said that led by food inflation, the CPI inflation expectedly eased to 5.5 per cent in November, falling back within the medium-term target range and offering a dose of relief. “We are optimistic about the rabi crop, considering the favourable impact of high reservoir storage and the ensuing La Nina conditions on sowing and crop yields, even as the low inventory levels of DAP pose a concern,” Nayar said.
“Subdued global commodity prices amid concerns over global demand should further support the moderation of headline inflation going forward. The outlook for agriculture remains positive, with good kharif production. Prospects for rabi sowing also remain conducive with healthy reservoir levels and good soil moisture from prolonged monsoons. As a result, inflationary pressures within the food basket should ease in the coming months,” said Rajani Sinha, chief economist of CareEdge Ratings.
