Driven by surging food prices, wholesale price index-based inflation rose to a 14-month high of 7.52 per cent in November from 7 per cent in the previous month, official data showed on Monday. The development makes a repo rate hike by the Reserve Bank of India (RBI) on Wednesday appear a foregone conclusion.
Inflation numbers for two earlier months have also been restated — both revised upwards. The September figure was revised to 7.05 per cent on Monday from the earlier estimate of 6.46 per cent. The figure for August had been revised last month to 6.99 per cent from the 6.10 per cent announced initially.
Inflation in vegetable prices went as high as 95.25 per cent in November against 78.38 per cent in the previous month, sparked by a rise in prices of potatoes and tomatoes. Inflation in onion prices remained high, though it came down in November as compared to October. Overall, food inflation surged to 19.93 per cent from 18.19 per cent a month ago.
“WPI inflation was surprisingly high in November. Vegetable prices remained at a significantly higher level. They started cooling off by the end of November and dropped in December. Hence, a downward impact on inflation will be seen only in December,” said Soumya Kanti Ghosh, chief economic adviser of State Bank of India.
This is the last set of data before the monetary policy review on Wednesday. Last week, official data showed that consumer price index-based inflation accelerated to an all-time high of 11.24 per cent in November compared to 10.17 per cent in October.
Experts are predicting that the central bank will opt for a 25-basis point hike in the repo rate. “We expect the RBI to raise the repo rate by 25 bps in the mid-quarter review to guard against further hardening of inflationary expectations and generalisation of food inflation,” said Aditi Nayar, senior economist at rating agency ICRA. Ghosh agreed that a hike of 25 bps was on the cards.
Industry chambers urged the central bank to take a contrarian call and hold rates if a cut was not possible. Assocham said data suggested that inflation was largely caused by a steep rise in food prices.
“We hope the RBI will take due cognisance of the fact that growth is still feeble and needs support,” said Ficci.
Prices of manufactured items also moved up in November, a trend seen since August. Inflation for manufactured products stood at 2.64 per cent in November from 2.5 per cent a month ago. Core inflation, which refers to manufactured items excluding food articles, stood at 2.7 per cent, a slight increase over 2.6 per cent a month ago. Core inflation is thought to be a crucial factor in monetary policy.