A spike in food prices pushed retail inflation to a three-month high of 5.55 per cent in November, though it remains within the RBI’s comfort zone of less than 6 per cent.

Inflation based on the Consumer Price Index (CPI) was 4.87 per cent in October and 5.88 per cent in November 2022, the government data released showed. The previous high was 6.83 per cent in August, and inflation has been on the decline since then.

According to the National Statistical Office (NSO) data, inflation in the food basket increased to 8.7 per cent in November from 6.61 per cent in October and 4.67 per cent in the year-ago month. The food basket has about 50 per cent weightage in CPI.

Core inflation, which strips out the volatile food and energy components, was estimated to be 4.05-4.2 per cent in November compared with 4.20-4.28 per cent in October, according to economists.

“The effective inflation for the bottom 50 per cent of the Indian population is 40 basis points higher during the episodes when the retail inflation is driven by food items,” Sunil Kumar Sinha, principal economist and senior director — public finance, India Ratings and Research, said.

Aditi Nayar, chief economist at Icra, said that the surge in food and beverages inflation to 8 per cent in November was largely led by a sharp increase in vegetables inflation, even as seven of the 12 food sub-groups reported a moderation in their year-on-year inflation print.

“This was the lowest print in the post-pandemic period. The sustained easing in the core CPI inflation is positive and has counterbalanced the menacing food inflation prints over the last few months,” Nayar said.

The Reserve Bank of India has been tasked by the government to ensure retail inflation remains at 4 per cent with a margin of 2 per cent on either side.

In the monetary policy announced last week, the RBI projected the CPI inflation at 5.4 per cent for 2023-24, with a reading of 5.6 per cent in the third quarter and 5.2 per cent in the fourth quarter.

Among the states, inflation was the highest in Odisha at 7.65 per cent. Other states which witnessed inflation of more than 6 per cent were Bihar, Gujarat, Haryana, Karnataka, Punjab, Telangana, and Rajasthan.

Industry growth

Industrial production growth accelerated to a 16-month high of 11.7 per cent in October, mainly due to double-digit growth in manufacturing, power and mining sectors’ output, according to the official data.

The factory output growth measured in terms of Index of Industrial Production (IIP) had contracted 4.1 per cent in October 2022. The previous high of IIP growth was recorded at 12.6 per cent in June 2022.

Dharmakirti Joshi, chief economist, Crisil, said: “There are signs of a slowdown ahead. The RBI’s consumer confidence survey of December showed a weakening in future expectations. Lagged transmission of the RBI’s rate hikes and measures to clamp down risky lending are expected to moderate credit growth and domestic demand.”

“Rural demand remains vulnerable to weak agricultural output, erratic weather and El Niño this year. The ongoing slowdown in some advanced economies is expected to add pressure on India’s exports in the second half of this fiscal,” Joshi said.