Amidst slowing economic growth and high inflation that is seen to have impacted the Reserve Bank of India’s Monetary Policy Committee’s legroom to cut rates, retail inflation in November is seen to have moderated but remained high at 5%. However, there remain concerns about prices of kitchen staples such as tomatoes and onions.
“We expect CPI to settle around 5% in November 2024, with risks tilted to the downside,” said a report by Bank of Baroda.
The consumer price index-based inflation rose to 6.2% in October from 5.5% in September, led by a sharp surge in retail inflation in food and beverages at 9.69%.
However, the BoB Essential Commodity Index (BoB ECI) witnessed moderation in November 2024 both on a sequential and year on year basis. “This is led by sharp correction in prices of tomato and onion. For onion, the retail price in November 2024 declined for the first time since July 2023,” noted the report.
For Tomato as well, the mandi arrival statistics showed a jump of 46% in November 2024 compared to November 2023. “Wholesale prices of tomatoes, onions and potatoes are also on the deflationary path. Thus, retail prices are likely to exhibit further downward correction in the near term,” the report said.
The MPC of the Reserve Bank of India is currently holding its bi-monthly meeting and RBI Governor Shaktikanta Das who chairs the rate-setting committee will announce its decisions tomorrow morning. With second-quarter GDP growth slowing down to an unexpected 5.4%, there has been growing calls for a rate cut by the MPC, which has kept its eye on lowering inflation on a durable basis.
However, as per Crisil’s monthly indicator of food plate cost vegetable prices continued to remain a concern in November. On-year, the cost of home-cooked veg thali year in November amid elevated tomato and potato prices rose 7%, and of non-vegetarian thali by 2%, in November,” said the report titled Roti Rice Rate.
Veg thali cost rose due to increase in the prices of tomato and potato, which collectively account for about 26% of the thali cost, it noted, adding that price of tomato increased 35% on- year to Rs 53/kg from Rs 40/kg in November 2023. Meanwhile the price of potato increased 50% on-year on a low base to Rs 37/kg from Rs 25/kg in November 2023 due to a 20% on-year decline in arrivals amid low yield following late blight infestation in Punjab, Uttar Pradesh and Gujarat.
It also highlighted that the price of pulses rose 10% on year due to lower opening and pipeline stocks but they are expected to dip once fresh arrivals begin in December. Vegetable oil prices also rose 13% on year due to import duty hike along with the festive and wedding season demand. However, the cost of LPG cylinder fell by 11%, which prevented further increase in the thali cost.