Retail inflation cools down in November from October’s 14-month high

India’s retail inflation for November cooled to 5.48% from a 14-month high of 6.21% in October as food prices declined.

Food inflation slowed to 9% from 10.9% last month, data released by the ministry of statistics and program implementation showed.

A reduction in prices was seen across categories, including vegetables, pulses, sugar, eggs, and milk.

Prices moderated following a bumper summer crop harvest, aided by a bountiful monsoon.

Meanwhile, a good monsoon, topped up reservoir levels and higher support prices may boost winter crop sowing and production, in turn further lowering food inflation in the next few months, the government said.

Rural inflation was recorded at 5.95%, while urban inflation was at 4.83%, according to the data.

Housing inflation was at 2.87%, which is slightly higher than October’s 2.81%, the data showed. The housing index applies only to the urban sector.

Retail inflation has stayed above 5% for the third month in a row, and was one of the reasons for the Reserve Bank of India’s monetary policy committee to hold back on making any change to the policy rate.

A further easing in prices may prompt new RBI governor Sanjay Malhotra to shift focus from inflation and address growth concerns.

RBI has maintained status quo on interest rates for about two years now, citing inflation risks, though analysts see Malhotra adopting a dovish stance on monetary policy.

“Core inflation likely ticked up slightly, but remains at non-threatening levels. Inflation’s conducive trend, coupled with softer growth prints, make the case for the RBI to consider easing rates in the first quarter,” Radhika Rao, senior economist at DBS Bank, said.

Aditi Nayar, chief economist at ICRA Ltd, said: “If the headline CPI (Consumer Price Index-based) inflation eases to 5% or lower by December, the likelihood of a rate cut by the MPC (monetary policy committee) in its February meeting would be very high..

“While the third-quarter average is expected to remain elevated, we see the winter crop arrivals to provide relief in the coming months,” Upasana Bhardwaj, chief economist at Kotak Mahindra Bank, said, adding: “We expect inflation to slowly inch towards the RBI’s medium-term target of 4% by mid-2025 providing room for monetary easing from February policy.”

The central bank has of late come under growing pressure from the political class to cut interest rates as growth slowed to a seven-quarter low of 5.4% in the July-September quarter.

Finance minister Nirmala Sitharaman and trade minister Piyush Goyal had both recently called for lower borrowing costs to support the economy.