New Delhi [India], December 22 : Uncertainties in food prices along with unfavourable base effects are likely to lead to a pick-up in retail inflation in November and December, the monetary policy committee of the Reserve Bank of India observed in their latest review meeting.
Kharif harvest arrivals and progress in rabi sowing, together with El Nino weather conditions, need to be monitored, as per the minutes of the meeting, which were released on Friday.
"The MPC (monetary policy committee) observed that recurring food price shocks are impeding the ongoing disinflation process," the minutes read.
"Domestic food inflation unpredictability and volatility in crude oil prices and financial markets in an uncertain international environment pose risks to the inflation outlook. The path of disinflation needs to be sustained. The MPC will carefully monitor any signs of generalisation of food price pressures which can fritter away the gains in easing of core inflation."
The RBI will remain resolute in its commitment to aligning inflation to the target, minutes noted.
Retail inflation in India rose at its fastest pace in three months in November, largely due to a spike in food prices. The retail inflation or Consumer Price Index, in November was 5.55 per cent. The October consumer price index (CPI) was at 4.87 per cent and 5.02 per cent in September.
Retail inflation in India, though, is in the RBI's 2-6 per cent comfort level but is above the ideal 4 per cent scenario.
Food inflation, which accounts for nearly half of the overall consumer price basket, was 8.70 per cent in November, against 6.61 per cent reported the previous month.
Prices of cereals rose by 10.27 per cent and vegetables by 17.7 per cent in November on a year-on-year basis. Pulses were up by 20.23 per cent, spices by 21.55 per cent and fruit prices were up 10.95 per cent last month, official data released by the Ministry of Statistics and Programme Implementation showed.
Barring the recent pauses, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
RBI meanwhile maintained India's retail inflation projections for 2023-24 at 5.4 per cent, with Q3 at 5.6 per cent and Q4 at 5.2 per cent. CPI inflation for Q1:2024-25 is projected at 5.2 per cent; Q2 at 4.0 per cent; and Q3 at 4.7 per cent, with risks evenly balanced.
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