economy

Retail  inflation accelerates in Nov  to 4.91% on high  food  prices

Retail  inflation accelerates in Nov  to 4.91% on high  food  prices

NEW DELHI : Retail inflation quickened to a three-month high in November, but remained within the central bank’s target band, giving it room to keep policy rates at a record low for longer to stimulate the economy. The Consumer Price Index (CPI) accelerated to 4.91% last month from 4.48% in October as food prices rose, offsetting the effect of a cut in fuel taxes, data released by the statistics department on Monday showed. A Reuters survey of economists expected inflation to be higher at 5.10%. Food prices, which contribute to nearly half of CPI, rose 1.87% in November from 0.85% in the previous month, the data showed. Retail inflation, however, remained within the Reserve Bank of India’s medium-term tolerance band of 2-6% for the fifth consecutive month, giving the central bank more time to reverse pandemic-era easy-money policies. “In our assessment, as long as CPI inflation remains within the target of 2-6%, the monetary policy committee and RBI will prefer to prioritize growth, and maintain policy support to impart durability and sustainability to the recovery, said Aditi Nayar, chief economist at rating agency Icra Ltd. In the bi-monthly monetary policy last week, the central bank’s rate-setting panel opted to keep policy rates unchanged to strengthen economic recovery amid threats to growth from the Omicron strain of the coronavirus. However, the panel will reassess the policy again in February. In the December meeting, RBI retained the retail inflation forecast for the fiscal year at 5.3%. RBI expects inflation to peak in the fourth quarter of this fiscal and soften after that as base effects turn adverse. “CPI inflation has increased to 4.9% and is inching closer to RBI’s annual expectation of 5.3% for 2021-22, said D.K. Srivastava, chief policy adviser at EY. According to the government, edible oil prices climbed 29.7% in November, fuel prices rose 13.4%, and transport and communication costs increased by 10% compared to inflation rates in the same month a year earlier. Vegetable prices, however, declined by 13.62%. Some experts said that the effect of vegetable price increases was understated in the index. “Some of the components like vegetables are contradictory to the ground level reality where the CPI shows a decline while prices in the market are high, especially for basic vegetables like tomatoes and onions, said Shambhavi Priya, associate economist at Care Ratings. Some said that the rise in prices of food and beverages, housing, and clothing and footwear had outpaced the moderation in the CPI inflation for fuel and light, pan, tobacco and intoxicants, and other miscellaneous items. “With input price pressures forcing producers to raise prices in many sectors, the November CPI inflation accelerated slightly faster than we had expected, shrugging off the favourable base effect and the cut in fuel taxes, said Nayar. The impact of fuel tax cuts had helped douse the transport and communications sub-index by 0.6% in November on a sequential basis, Icra said. Download.

economy 2021-12-14 Livemint