Retail food prices make up nearly half of the CPI inflation basketHighlightsConsumer inflation soars to highest level recorded since July 2016 High food inflation due to surge in vegetable prices fuels CPI RBI tracks retail inflation primarily for formulating monetary policy Consumer inflation soared to 5.54 per cent in November, the highest level recorded since July 2016, official data showed on Thursday.
High food inflation driven by a continued surge in vegetable prices, particularly onions, fuelled overall inflation.
Gauged by the Consumer Price Index (CPI), consumer inflation was higher than economists' estimate.
Thursday's data further dashed hopes of a rate cut by the RBI - which tracks consumer inflation data primarily for formulating monetary policy - in February.
Fifty two economists had expected consumer inflation - or the rate of increase in consumer prices - 5.26 per cent last month, according to poll by news agency Reuters between December 5 and 10.Retail food prices, which make up nearly half of the inflation basket, increased 10.01 per centin November from a year earlier, as against 7.89 per centin October.In a surprise move, the Reserve Bank of India (RBI) last week kept the key lending rates unchanged at existing levels but acknowledged room for further rate cuts ahead.The central bankhas so far this year reduced the repo rate by 135 points to a nine-year low of 5.15 per cent to curb inflation and spur growth.In its fifth bi-monthly policy review of fiscal year 2019-20, the RBI cited concern about near-term inflation.
It said inflation is expected to rise in the near term but moderate below its goal of 4 per cent by the second quarter of next fiscal year.The central bank raised its CPI projections to 5.1-4.7 per cent in the second half of 2019-20 and 4.0-3.8 per cent in the first half of next financial year citing "broadly balanced" risks.With economic growth at its weakest in over six years, 49 per cent of economists, 33 of 67, in a snap poll taken by Reuters after the Monetary Policy Committee's decision, predicted that this would be a temporary pause and another cut would come in February.
The remaining economists expected no move at the February 4-6 meeting.A firm majority, over 80 per cent economists said the RBI will cut rates by end-June, with the median forecast for a 25-basis point trim to 4.90 per cent, and then remaining on thesidelines till the end of the year.The RBI currently has an "accommodative" policy stance, which eradicates the possibility of going back to a rate hike suddenly.
The RBI made the switchfrom a "neutral" stance in June this year, which allows it to either tighten or loosen monetary policy at any time.Separate official data showed industrial productionor factory output - determined by the Index of Industrial Production (IIP) - shrank 3.8per cent in October as against 4.3per cent in the previous month.