The retail inflation for the month of November reached 4.88 per cent, touching a 15-month high on the back on rise in food and fuel prices. The inflation numbers also exceeded RBI estimates that retail inflation numbers will remain within 4.2 per cent to 4.6 per cent. In its bi-monthly monetary policy statement released in October, the Reserve Bank of India had projected inflation to stay in the range of 4.2 to 4.6 in the second half of the current year.
Inflation in eggs shot to 7.95 per cent in November on annual basis, compared to 0.69 per cent in the previous month. In the fuel and light segment, retail inflation was 7.92 per cent. For vegetables it was 22.48 per cent in November. The inflation in the segment was a only 7.47 per cent in October.
However, in the pulses segment the print continued to show disinflationary trend as it contracted by 23.53 per cent on annual basis. On overall basis, the inflation in the food segment increased to 4.42 per cent in November as compared to 1.9 per cent in the preceding month.
RBI has now increased its inflation projection to the range 4.3-4.7 per cent for the remainder of the current fiscal which ends in March 2018, according to a Reuters report. The report further added that inflation will remain above the 4-per-cent mark in 2018, making rate cuts improbable.
The uptick in retail inflation could push the central bank to increase policy rates in the comimg days. In its last meeting, the Monetary Policy Committee had left the policy interest rates unchanged, with repo rate at 6.00 per cent and reverse repo rate at 5.75 per cent. Despite the pressure, RBI had refrained from cutting interest rates since the last decrease in August, on account of inflationary trends.
Retail inflation, measured by year-on-year change in the Consumer Price Index (CPI), recorded a seven-month high at 3.58 per cent in October, driven by a sharp uptick in momentum, tempered partly by some favourable base effects. The CPI in November 2017 saw a monthly growth of 1.1 per cent in comparision to October 2017, whereas Consumer Food Price Index rose 1.58 per cent.
Spurred by increase in fruit and vegetables prices, annual retail food inflation climbed to 4.42 per cent in November from 1.90 percent the previous month. Meanwhile, fuel inflation quickened to 7.92 per cent from 6.36 per cent, driven by rise in global prices of crude oil.
The Reserve Bank's survey of households showed inflation expectations firming up in the latest round for both three months ahead and one year ahead horizons. The October bi-monthly statement projected inflation to rise and range between 4.2-4.6 per cent in the second half of this year, including the impact of increase in house rent allowance (HRA) by the Centre. The headline inflation outcomes have evolved broadly in line with projections.