Retail inflation eases to 6.93% in Nov on softer food prices

Our Bureau New Delhi | Updated on December 14, 2020

Pricier manufactured goods push up WPI inflation to 1.55%; no interest rate change seen

Vegetables becoming sharply cheaper and a softening in the prices of food items tempered retail inflation to 6.93 per cent in November.

The Consumer Price Index (CPI)-based inflation was at a high of 7.61 per cent in October. However, wholesale inflation, also known as producers’ inflation, took a contrarian path and rose to 1.55 per cent in November, from 1.48 per cent in the previous month mainly on account of increase in the prices of manufactured products.

Still, there is little possibility of key interest rates going down as the retail inflation is above the RBI’s comfort median rate of 4 per cent. During the last two meetings, the RBI’s Monetary Policy Committee (MPC) decided to keep the repo rate (at which the RBI lends money to banks) unchanged.


According to data released by the National Statistical Office (NSO), retail inflation registered sharp changes in food prices. For instance, retail inflation for vegetables dropped to 15.63 per cent from 22.51 per cent while for fruits it came down to 0.27 per cent from 0.34 per cent. This lowered not just the overall retail inflation but also retail food inflation which came down to single digit, at 9.43 per cent in November against 11 per cent in October.

A drop in vegetable and fruit prices was also observed at the producers’ level, as indicated by the Wholesale Price Index (WPI) dipping sharply for many items. For example, the wholesale inflation for onion turned negative at 7.58 per cent and for fruits at 3.80 per cent. Inflation for wheat and cereals too were in the negative zone at 10.09 per cent and 5.52 per cent respectively. However, the wholesale inflation for potato soared 115.12 per cent.

Sreejith Balasubramanian, Economist with IDFC AMC, said: “With food price momentum easing, it is now to be seen how broad-based the food price disinflation cycle becomes, and for how long. However, any pressure from the higher sequential momentum seen in various manufactured goods categories is also to be watched.” Rajani Sinha, Chief Economist at Knight Frank India, saidCPI inflation has moderated in November compared to the previous month, but at 6.9 per cent it still remains above RBI’s comfort zone.


Published on December 14, 2020

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