In October, inflation in India reached its highest point in 14 months, hitting 6.2%. However, by November, it had dropped slightly to 5.5%. This small decrease was mainly due to a slowdown in the rising prices of certain food items.
For example, vegetable prices, which had spiked to 42.2% in October, eased down to just under 30% in November. Similarly, food grain prices increased at their slowest rate in nearly two years, and the rise in pulses prices dropped to just above 5%, after several months of sharp increases.
Despite these improvements, overall food inflation remained high, continuing at over 9% for the third month in a row. Some items, like edible oils, saw significant price hikes, with a 13.3% increase, the highest in two and a half years.
This was partly due to global price rises and higher import duties set by the government. Coconut oil prices shot up by over 42%, while other items like garlic, potatoes, cauliflower, and cabbage also became much more expensive.
Rural areas have been hit even harder by inflation. While there has been talk of slowing demand in cities, rural consumers are facing a much more difficult situation. In November, rural inflation stood at around 6%, with food prices contributing significantly to the rise.
This increase in costs is not just affecting consumers but businesses too. Manufacturers and service providers are facing higher costs, which have led them to raise their own prices, the fastest pace in 12 years, further contributing to inflation.
The Reserve Bank of India (RBI), which manages inflation, had originally expected inflation for the October-December period to average 4.8%. However, with inflation still high, the RBI raised its forecast to 5.7%. Inflation for December could remain around 5.4%, still well above the RBI’s target of 4%. The RBI now believes it may only reach its target of 4% in the second quarter of 2025-26.
The Indian government has been pushing for interest rate cuts to help stimulate growth and ease the cost of living. However, the RBI has not agreed to these cuts yet. Some experts believe that the RBI might lower rates in February, but if inflation decreases and economic growth picks up, the need for cuts may lessen.
The government’s 2025-26 Budget, which will be presented before the next RBI meeting, could influence this decision. If the Budget shows the government is taking steps to reduce the cost of living, it could help make the case for rate cuts in the future.
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