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India’s retail inflation likely to ease: Report

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New Delhi, Dec 10:  India’s retail inflation based on the Consumer Price Index (CPI) is expected to ease to 5.5 per cent in November due to a decline in food prices, according to a Morgan Stanley report.

“We expect CPI inflation to edge downwards to 5.5 per cent in November from 6.2 per cent in October, aided by a moderation in food prices, even as core ticks up and fuel continues to decline. On a sequential basis, we anticipate the index to decline on the back of contracting food prices and a deceleration in core CPI,” the report.

The core CPI includes goods and services but excludes food and fuel, the prices of which are considered more volatile. CPI inflation rose to 6.21 per cent in October as higher prices of food items such as vegetables spiked during the month.

This was the first time that inflation breached the RBI upper limit of 6 per cent in recent months. Retail inflation has increased from 5.49 per cent recorded in September as the prices of vegetables surged by as much as 42.18 per cent in October as the late withdrawal of the monsoon this year resulted in damage to crops and reduced supply in the market.

RBI Governor Shaktikanta Das said last week, “India’s growth story is still intact. Inflation is on the declining path, but we cannot overlook the significant risks in the outlook. This risk cannot be underestimated.”

The RBI Governor was optimistic about the outlook for the economy, observing that “the balance between inflation and growth is well poised.” The Reserve Bank of India (RBI) on Friday slashed the cash reserve ratio (CRR) for banks by 0.5 per cent to make more funds available for lending to spur economic growth but kept the key policy repo rate unchanged at 6.5 per cent with an eye on inflation. The CRR cut will infuse Rs 1.16 lakh crore into the banking system and bring down market interest rates.

IANS

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