Inflation Moderates in November, But Concerns Remain
India's retail inflation moderated to 5% in November 2024, offering some relief after months of high inflation. However, concerns remain about the prices of essential kitchen staples like tomatoes and onions.
The moderation in inflation was primarily driven by a sharp correction in the prices of tomatoes and onions. The BoB Essential Commodity Index (BoB ECI) witnessed a decline in November 2024 compared to both the previous month and the same month in the previous year. This was mainly due to a significant increase in the arrival of tomatoes and a decline in the retail price of onions for the first time since July 2023.
Despite the overall moderation in inflation, the cost of vegetables continued to be a concern. The Crisil Roti Rice Rate report highlighted that the cost of a home-cooked vegetarian thali rose by 7% in November 2024 due to elevated tomato and potato prices. The price of tomatoes increased by 35% year-on-year, while the price of potatoes rose by 50% due to a decline in arrivals and low yield.
The Reserve Bank of India's Monetary Policy Committee (MPC) is currently holding its bi-monthly meeting. With inflation moderating and GDP growth slowing down, there have been calls for a rate cut by the MPC. However, the MPC will need to carefully balance the need to control inflation with the need to support economic growth.
Overall, the moderation in inflation in November 2024 is a positive development. However, concerns remain about the prices of essential commodities like vegetables. The MPC will need to closely monitor the situation and take appropriate action to ensure that inflation remains under control while supporting economic growth.