A spike in food-related inflation in India has the RBI apprehensive

 A spike in food-related inflation in India has the RBI apprehensive

 A spike in food-related inflation in India has the RBI apprehensive

Although somewhat less than predicted by experts, the consumer price index increased by 5.55% in November over the previous year, taking it even farther away from the Reserve Bank of India's 4% objective.

   On Wednesday, December 6, 2023, customers peruse fruits at a market stand in Mumbai, India. For the first time, India's stock market valuation surpassed $4 trillion on Tuesday, marking a noteworthy achievement for the fifth-largest stock market globally. The equity markets are catching up quickly to Hong Kong, which is in decline.

The central bank of India has cause to maintain higher interest rates for an extended length of time as the country's industrial production increased more than anticipated and inflation increased for the first time in four months.

Although somewhat less than predicted by experts, the consumer price index increased by 5.55% in November over the previous year, taking it even farther away from the Reserve Bank of India's 4% objective.

Higher food costs were the primary cause of the inflation increase, a problem that the administration of Prime Minister Narendra Modi has made a top priority in the run-up to the elections. In an effort to lower consumer prices, the government has limited the export of a number of food staples, including rice, wheat, and onions.

The drop in core inflation, which takes into account unstable prices for food and energy, has been cited by economists as evidence that the RBI may decide to maintain rates lower longer and that a rate decrease is probable for next year. According to estimates from Bloomberg Economics, core prices increased 4.12% in November compared to the same month last year, after rising 4.25% in October.

The smooth track of CPI inflation has been disturbed by higher food inflation, but inflation expectations seem steady despite increased food costs, and there is no indication of any big second inflation, according to a report from Barclays Plc economist Rahul Bajoria. A sequence effect is not supported by any research."

At its fifth straight policy meeting last week, the RBI maintained its benchmark interest rate, although Governor Shaktikanta Das raised concerns about the dangers associated with rising food costs. According to economists, the RBI will likely not lower rates until after the US Federal Reserve begins to do so, and it will likely hold steady at current levels until next year.

What Is Said by Bloomberg Economics

Core inflation dropped from 4.3% in October to 4.1%, which caused the headline number to significantly increase. The persistent decrease in core inflation indicates that demand-side pressures are being contained by the central bank's restrictive monetary policy.

The economist Abhishek Gupta, an Indian

In addition, the government disclosed statistics indicating that in October, manufacturing production growth reached a 16-month high of 11.7%, bolstering the optimistic outlook for the economy. The central bank increased its growth prediction to 7% from 6.5% last week, although it maintained its 5.4% inflation prediction for the current fiscal year.

India's potential growth has grown to 7%, according to Axis Bank Ltd.; at that rate, economic expansion is possible without raising inflation.

Food inflation, which accounts for about half of the consumer price basket, increased to 8.7% in November from 6.61% in October, according to data released on Tuesday. Vegetable and pulse prices increased 17.7% and 20.23%, respectively, from a year earlier. Due to shortages brought on by erratic monsoon rainfall, the price of vegetables like tomatoes and onions has soared.

In November, the cost of shoes and clothes increased 3.9% over the previous year, while the cost of housing increased 3.55%. The cost of fuel and electricity decreased by 0.77%.

Unusual weather circumstances and food prices are the only factors contributing to the increase in November's CPI inflation, according to Upasana Bhardwaj, an analyst at Kotak Mahindra Bank Ltd.