Retail inflation eases to 5.48% in November from 6.21% in October

India’s retail inflation eased to 5.48% in November, down from a 14-month high of 6.21% in October, driven by a slowdown in food prices. Despite the moderation, consumer prices have remained above 5% for the third consecutive month.

Food inflation dropped to 9% in November, compared to 10.9% in October, with vegetable prices seeing significant relief. Vegetable inflation moderated to 29% in November from a sharp 42% in October. Excluding vegetables, the Consumer Price Index (CPI) inflation stood at 3.9%, well below the Reserve Bank of India’s (RBI) lower threshold of 4%.

According to Rajani Sinha, Chief Economist at CareEdge, “The CPI inflation moderated to 5.5% in November from 6.2% in October. Vegetable inflation, a major contributor to recent inflationary pressures, eased substantially.”

The November inflation rate of 5.48% was in line with the median forecast of 5.5% from 15 analysts surveyed by Moneycontrol.

High inflation remains a concern, and it played a key role in the RBI's decision to maintain its policy rate unchanged for the eleventh consecutive time in its December meeting. Experts predict that while inflation is expected to ease, it may still remain above 5% for December.

Madan Sabnavis, Chief Economist at Bank of Baroda, highlighted that December’s inflation reading, expected to be above 5%, will pose a challenge for the RBI in its February meeting, making decisions on interest rates more complex.

Despite some signs of moderation, certain food categories, such as potatoes (66.6%) and carrots (33.4%), continued to experience high inflation. Pulses, garlic, and other staples remained elevated, though some categories showed improvement.

Core inflation, excluding volatile food and energy prices, was stable at 3.6% in November. The demand conditions remained similar to October, with experts predicting they will persist into December.

Looking ahead, economists expect food inflation to cool further in 2025, with the Asian Development Bank forecasting a dip to 4.3% by FY26 from the earlier projected 4.5%.

If inflation continues to ease in December, experts believe there may be room for monetary policy adjustments, potentially leading to interest rate cuts by the RBI in 2025. Aditi Nayar, Chief Economist at ICRA, anticipates the possibility of two rate cuts in the upcoming cycle if inflation trends downward.

With better monsoon prospects, food inflation may remain under control, providing the RBI’s monetary policy committee with more flexibility as it navigates inflation management in 2025.