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India Retail Inflation November 2023
India Retail Inflation November 2023: In November 2023, India witnessed a significant surge in retail inflation, reaching 5.55%, after a four-month low in October. This rise is primarily attributed to a sharp increase in food prices, causing concerns about the economic impact and the Reserve Bank of India’s (RBI) response.
Food Prices Drive Inflation
The surge in November’s retail inflation is primarily due to a substantial increase in food prices. Food inflation for the month stood at 8.70%, driving the overall inflation rate up. Notably, onion prices rose by 58%, tomatoes by 35%, and even potatoes, usually more stable, saw a 2% increase in prices.
Uneven rainfall and a delayed monsoon in 2023 impacted the harvesting cycle of both rabi and kharif crops, leading to tighter supplies. This has been particularly challenging for key food items, causing concerns about food production amidst weak sowing, lower reservoir levels, and erratic weather conditions.
RBI’s Response and Monetary Policy
While the inflation rate remains within the RBI’s acceptable range of 2-6%, the surge in November raises challenges for the central bank. In its recent policy review, the RBI’s Monetary Policy Committee (MPC) chose to maintain key rates but emphasized their vigilance to undertake appropriate policy actions if needed.
RBI Governor Shaktikanta Das stated, “Against this backdrop, the MPC decided to keep the policy repo rate unchanged at 6.50 percent but remain highly alert and prepared to undertake appropriate policy actions, as warranted.”
Index of Industrial Production (IIP): October 2023
In contrast to the inflation scenario, India’s Index of Industrial Production (IIP) reached a 16-month peak in October 2023, surging by 11.7%. This significant growth follows a contraction of 4.1% in the same period the previous year and indicates a positive trend in industrial output.
India Retail Inflation November 2023: Upasana Bhardwaj, chief economist at Kotak Mahindra Bank, highlighted that the surge in November’s Consumer Price Index (CPI) inflation is primarily led by food inflation. She expressed concerns about food production, citing weak sowing, lower reservoir levels, and unpredictable weather conditions.
Bhardwaj also mentioned the moderation in core inflation, providing relief to the RBI and suggesting a prolonged pause in monetary policy.
Pulses: A Cause for Concern
Rahul Bajoria, Managing Director at Barclays, expressed worry about the price momentum in pulses. Prices of key pulses rose by 0.1-2.9% month on month in November, following a sequential increase in October. Bajoria emphasized that despite high pulse imports, India’s significant demand-supply gap might keep pulses CPI inflation in double-digits in the near term.
The surge in India retail inflation November 2023, driven by soaring food prices, poses challenges for the economy and the RBI. The impact of weather-related issues on food production, particularly for key items like pulses, raises concerns about the supply-demand dynamics. While the industrial production is on an upward trend, the RBI remains vigilant, ready to take necessary policy actions if the inflationary pressure persists.
This scenario underscores the delicate balance between economic growth and inflation control, with the central bank closely monitoring the evolving situation to ensure stability in India’s economic landscape.
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