At 6.6% for the week ended November 26, it is the lowest in 39 months; decline likely to influence next RBI decision on policy rates.
Used to big spikes in food inflation, the country at last got some respite, with the number falling to a 39-month low of 6.6 per cent for the week ended November 26 as compared to the earlier one, as almost every item witnessed a fall in the rate of price rise, except for fruits.
The headline number for all of November is to be released next week and will play an important role in the Reserve Bank of India’s next decision on rates. Industrial growth data for October, also to come out next week, will be another factor shaping RBI’s monetary decision, as factory output growth is expected to be dismal.
The fall in food inflation by over a percentage point from eight per cent in the previous week also gave some breather to the government, as Parliament began a discussion on price rise yesterday. This is the lowest rate of food inflation, as measured by the Wholesale Price Index (WPI), since August 9, 2008, when it was 6.19 per cent.
This has come despite the adverse base effect, in the sense that food inflation last year at this point of time was 8.93 per cent, lower than 9.03 per cent a week earlier. So, the base effect should have shown a higher inflation figure for the week ended November 26 this year.
“Food inflation is expected to moderate further in December, particularly on account of the base effect,” said Icra economist Aditi Nayar. Food inflation was near nine per cent in the same period last year, signifying a high base.
Notwithstanding the moderating economic growth impulses, Nayar expected the RBI to keep the repo rate unchanged in the coming policy review, to continue to restrain inflationary expectations. Experts attributed the decline in inflation to the good monsoon and a plentiful kharif harvest. “Farm output has been good and food inflation is expected to remain at a moderate rate for some time,” said Crisil chief economist, D K Joshi. He said one had to wait and see how inflation in manufactured products fared in November. “However, the moderation in food inflation will at least ensure that RBI maintains the interest rate at current levels,” he added.
Inflation in protein-based items declined during the week, but still remained in double-digits. “There are structural factors behind the high inflation in protein-based items. While consumption of such products has increased, production has not kept pace,” Joshi said.
