November retail inflation reaches 5.54%, at 3-year high

India's retail inflation in November rose to 5.54% from 4.62% in October, highest since 2016 and over RBI's medium-term target of 4%.

Higher food prices contributed to the spike. Food price inflation (Rural and urban) climbed 10.01% in November.

During the month, inflation in vegetables shot up to 35.99 per cent, as against 26.10 per cent in October.


Likewise, the prices of cereals and eggs grew at a faster pace of 3.71 per cent. Prices of meat and fish rose by 9.38 per cent annually and of eggs by 6.2 per cent in November.

The share of food in headline CPI in India is at 45.9%. The rise in inflation is also due to higher food prices.

Inflation based on Consumer Price Index (CPI) was 4.62 per cent in October, and 2.33 per cent in November 2018.

Prices of onions, in particular, shot up by 45.3 per cent in September and further by 19.6 per cent in October.

Retail food prices, which make up almost half of the inflation basket, increased to 10.01% in November, compared with a 7.89 % rise in October.

Core inflation remained unchanged from October at 3.5%

The MPC in its August meeting had forecast inflation for the second half at 3.5-3.7%, which was retained in October and come December, it goes to 5.7-4.1%.

Core inflation, which excludes volatile components like food and fuel, has been on a downward trajectory. Suggesting a lack of demand and weak economic activity.

RBI's decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.

India's Retail inflation for the month of October breached the Reserve Bank of India's (RBI) medium-term target of 4% for the first time since July 2018 due to higher food prices even though RBI had predicted that food prices "are likely to moderate as winter supplies enter the market".

In the judgement of the MPC, inflation is rising in the near-term, but it is likely to moderate below target by Q2:2020-21.