India's November CPI Inflation Moderates To 5.48%, Food Inflation Cools Down; RBI Target Still Far

India's retail inflation, as measured by the Consumer Price Index (CPI), eased to 5.48% in November, down from 6.21% in October, according to data released by the Ministry of Statistics and Programme Implementation on Thursday. While the decline marks some relief, food prices continued to remain elevated, with food inflation recorded at 9.04%, marginally lower than 10.9% in October.

November's inflation print remained above the Reserve Bank of India's (RBI) medium-term target of 4% for the third consecutive month. The RBI's tolerance band allows for a range of 2-6%.

Inflation Trends

Food inflation, while easing slightly, continues to be a major driver of overall CPI. The top five items showing the highest year-on-year inflation in November were:
Garlic: Up 85.14%
Potatoes: Up 66.65%
Cauliflower: Up 47.7%
Cabbage: Up 43.58%
Coconut Oil: Up 42.13%

Other notable contributors include cereals, with prices rising 6.88%, marginally lower than the 6.94% increase in October. Inflation in pulses was recorded at 7.43%, down from 9.81% last month.

Among protein-based items, inflation in meat and fish rose to 4.67% (up from 3.17% in October), while inflation in eggs stood at 4.84%, relatively stable from the previous month's 4.87%.

In non-food categories, clothing and footwear inflation increased to 2.75%, housing prices rose by 2.87%, and milk and milk products saw inflation at 2.85%.

RBI's Stance

The persistent inflationary trend led the Reserve Bank of India's Monetary Policy Committee (MPC) to maintain the status quo on the policy rate for the eleventh consecutive time in December. However, the November inflation print prompted the RBI to revise its inflation forecast for FY25 from 4.5% to 4.8%.

Experts anticipate further moderation in inflation beginning in January, as food prices are expected to cool with improved supply conditions. The Asian Development Bank (ADB), in its recent economic outlook, projected India's inflation to ease to 4.3% by FY26, down from 4.5% in its earlier projection. The recent inflation trends have also sparked speculation about a potential 25 basis-point rate cut during the RBI's February policy meeting.

While overall inflation eased, the steep rise in prices for essentials like garlic, potatoes, and pulses continues to burden households. Economists argue that sustained efforts to stabilize food prices, particularly for perishables, will be key to long-term price stability.

Global inflation trends, especially in developed economies, indicate a softening trajectory, offering some optimism for India. With global commodity prices stabilizing and domestic policies aimed at improving food supply chains, the outlook for 2024 appears more balanced.