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India retail inflation rises to 4.91% despite fuel duty cuts

09:17, 14 December 2021

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Concept of Inflation word on Indian currency Notes.
Higher price of vegetables lead the surge in the index – Photo: Shutterstock

India’s consumer price index (CPI)-based inflation rose to 4.91% in November compared with 4.48% in the previous month and 6.93% a year ago, announced the National Statistics Office, an arm of the Ministry of Statistics and Programme Implementation, today in a press release.

But, the latest figure of CPI inflation that tracks the average price of goods and services consumed by households was considered higher by economists as excise duty cuts by the federal and state government on fuel prices did not help, indicating that underlying demand is strengthening.

Food inflation increased to 1.87% in November from 0.85% a month ago, contributing to the surge in the index owing to a rise in price of vegetables.

Pressure’s rising

“We saw sequential gains in inflation coming in the wake of ongoing increases in perishable food prices, with some mitigation seen from lower fuel costs given the large excise duty cuts seen in early November,” said Rahul Bajoria, chief economist at Barclays.

“The imported price pressures also remain broadly intact, as domestic cooking gas and imported food costs stay high. We see base effects remaining dominant for a few more months,” he added. 

Core inflation, which includes non-food and non-fuel items, surged to a five-month high of 6.08%. Moderation in the CPI inflation for fuel and light, tobacco and intoxicants, and miscellaneous items was outpaced by a rise in inflation for food and beverages, housing, clothing, and footwear, the data showed.


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Waning effect of high base 

“We expect CPI inflation to average 5.5% this fiscal compared with 6.2% last year. The high-base effect is playing a key role in keeping headline CPI inflation lower than last year,” according to CRISIL Ratings.

“We expect non-food inflation to remain under pressure in the coming months as commodity prices remain elevated, and producers passing through high input costs to consumers amid improving demand conditions,” the agency added.

While the high-base effect from last year is helping the index print stay lower, it is wearing out gradually, and contributing to the pick-up in inflation. Rising food and core inflation also pulled the CPI up, while fuel inflation eased as crude prices moderated.

Data provided by the government showed that urban inflation rose to a greater extent than rural. Urban inflation in November was 5.5% compared with 5% in October, while rural inflation was 4.3% versus 4.1% in October. 

Read more: Indian paper packaging sector to see 15% growth: CRISIL

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