India Inflation November 2022

India: Inflation falls into Central Bank’s target range in November

Inflation fell to 5.9% in November, significantly undershooting market expectations (October: 6.8%). November’s result represented the weakest inflation rate since December 2021 and was within the Central Bank’s 2.0–6.0% target range. The result was driven by moderating price pressures for food and beverages. The decline in food prices was linked to a strong winter harvest and lower prices for agricultural products on global markets.

That said, core inflation remained sticky at 6.0%.

The trend pointed up slightly, with annual average inflation coming in at 6.7% in November (October: 6.6%).

Lastly, consumer prices fell 0.11% in November over the previous month, compared with a 0.80% rise in October. November’s result marked the weakest reading since January.

Looking ahead, our panelists expect inflation to continue easing next year on a tougher base effect, slowing economic activity and cooling commodity prices. Key factors to watch include monetary policy, currency fluctuations, the Russia-Ukraine grain deal and changes in export controls for key agricultural commodities.

Analysts at ING commented on the implications for monetary policy:

“With inflation now below the RBI’s policy rate (repo rate is 6.25%), there is a strong case to be made for at least easing back on further tightening and possibly even considering a pause/peak in rates. That would certainly be welcome news for the economy, which registered a 4.0% decline in industrial production in October and could do with a boost.”

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