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Headline inflation, despite easing sharply in November, continued to stay above nine per cent for the 12th consecutive month.
While industry responded by renewing the call for the RBI to soften its anti-inflationary stance in its forthcoming monetary policy review, analysts continued to express concern over the persistence of inflationary pressures in the non-food manufactured products group.
As a result, despite the dip in the headline inflation estimate, the majority view is that the RBI could leave the key rates unchanged in the policy review on Friday, despite the sharp contraction in industrial output in October 2011.
Government data released on Wednesday showed headline inflation in November eased to 9.11 per cent, down from the previous month's 9.73 per cent annual rise, as prices of food items dipped on account of items such as cereals, vegetables and fruits.
Worrying factor
The worrying factor, though, is the sharp upward revision in the final inflation figure for September inflation to double-digits — 10 per cent from the provisional estimate of 9.7 per cent. Also, while food and primary articles, which account for a weight of around 20 per cent in the WPI, have seen the year-on-year inflation rates dip (from 11.4 per cent to 8.53 per cent), the other key product groups continue to witness an upsurge.
Manufacturing and fuels, which constitute 65 per cent and 15 per cent of the WPI by weight, continue to climb and in November, the inflation rate for manufacturing moved up from 7.66 per cent to 7.7 per cent and fuel and light inched up from 14.79 per cent to 15.48 per cent.
The Finance Minister, Mr Pranab Mukherjee, responded to the dip in the headline inflation estimate by saying that policymakers must now shift their focus from taming inflation to reviving economic growth, as the sharp industrial slowdown was due partly to domestic anti-inflation policies as well as the economic crisis in Europe.
anti-inflationary stance
The RBI has raised its lending rate 13 times since March 2010 to control inflation, but increasing prices of food and manufactured products have prevented inflationary pressures from easing.
“The easing in the annual rate of inflation for November 2011 to 9.1 per cent… provides the ideal foil for the RBI to soften its anti-inflationary stance in the forthcoming monetary policy review,” said Mr Harsh Mariwala, President, FICCI.
Ms Aditi Nayar, Economist, ICRA Ltd, said that despite the moderation in the headline inflation rate, the rise in the annual inflation related to non-food manufactured products, as well as the increase in the index levels of nine of the 11 sub-groups on a month-on-month basis indicates the persistence of inflationary pressures.
“We expect the RBI to leave the repo rate and the CRR unchanged in the upcoming mid-quarter policy review, in spite of the contraction in industrial output in October 2011.”
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