India’s retail inflation jumped to 5.55% in November from 4.87% in the preceding month, according to data released by the National Statistical Office (NSO) on Tuesday.

Despite the surge, retail inflation remains within the Reserve Bank of India’s (RBI’s) tolerance band of 2-6%.

Rural inflation rose to 6.09% in November as against 5.12% in October while urban inflation surged to 5.68% in November from 4.62% in the preceding month.

This comes days after the Reserve Bank of India’s monetary policy committee unanimously kept the key repo rate unchanged at 6.5% for the fifth consecutive time. The MPC also decided by a majority of 5 out of 6 members to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target.

Food inflation increased to 8.7% in November. The inflation rate for vegetables rose to 17.7% last month from 2.7% in October. Inflation in pulses and spices came in at 20.23% and 21.55% in November.

Food inflation, which was in double-digits in July, had moderated to 6.2% in October with the correction in vegetable prices.

The near-term outlook is masked by risks to food inflation which might lead to an inflation uptick in November and December, RBI governor Shaktikanta Das recently said. This needs to be watched for second-round effects, Das said.

“Going ahead, inflation outlook would be considerably influenced by uncertain food prices. High frequency food price indicators point to an increase in prices of key vegetables which may push CPI inflation higher in the near-term. The ongoing rabi sowing progress for key crops like wheat, spices and pulses needs to be closely monitored. Elevated global sugar prices is also a matter of concern,” he added.

The MPC projects CPI inflation at 5.4% for 2023-24, with Q3 at 5.6% and Q4 at 5.2%. CPI inflation for Q1 FY25 is projected at 5.2%; Q2 at 4%; and Q3 at 4.7%.

The primary target of monetary policy is price control and attaining 4% inflation target, according to Das. “We still have a distance to cover to reach 4%. Monetary policy loosening is not on the table for now,” said Das.

According to the RBI governor, the rate action so far is still working its way into the economy. “Monetary policy must continue to be actively disinflationary to ensure fuller transmission and anchoring of inflation expectations,” said Das.

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