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BENGALURU - India's retail inflation accelerated to 5.54% in November due to high food prices, government data showed on Thursday.
November inflation was higher than 5.26% forecast in a Reuters poll of analysts.
ADITI NAYAR, PRINCIPAL ECONOMIST, ICRA LTD, GURUGRAM
"While the CPI food inflation rose to an uncomfortably high 10% in November 2019, a moderation in vegetable prices should douse food inflation to a large extent in early 2020."
"The sharp uptick in the headline CPI inflation in November 2019 justifies the pause undertaken by the prescient Monetary Policy Committee (MPC) in its last policy review."
"We expect the CPI inflation to spike further to 5.8%-6.0% in December 2019, close to the upper threshold of the MPC's medium-term target, driven by the recent revision in telecom tariffs. As a result, we expect the MPC to remain on hold in its February 2020 policy review."
SAKSHI GUPTA, ASSISTANT VICE-PRESIDENT, HDFC BANK, GURUGRAM
"The higher inflation print for November was driven by transitory factors like increase in food inflation while core inflation continued to remain subdued, signalling that demand conditions in the economy remain anaemic."
"Going forward, we expect the food spikes to perhaps moderate from January 2020 onwards, although increase in telecom tariffs and any increase in GST rates could put upward pressure on core inflation."
"On the balance, we expect inflation readings to remain above 5% until February 2020. Consequently, we expect the Reserve Bank of India (RBI) to stay on hold in its February meeting and probably deliver another cut in the April-June 2020 quarter."
"In its latest policy meeting, the RBI communicated its discomfort with inflation readings crossing its 4% target and that could be the driver for its future rate decisions as well."
"Growth momentum continues to remain weak and warrants support from the fiscal side."
VIVEK KUMAR, SENIOR ECONOMIST, YES BANK, MUMBAI"CPI
inflation surprised on the higher side with November print of 5.54% coming close to the upper end of the inflation targeting band."
"Like previous month, the surge was predominantly led by food and fuel categories while core inflation momentum continues to remain subdued around 3.5%."
"In the near term, pressure on inflation could persist because of inadequate food supplies, recent sharp hike in telecom tariffs. We expect CPI inflation to average close to 5.3% and 5.5% in the third and fourth quarters of FY20, respectively."
NIKHIL GUPTA, CHIEF ECONOMIST, MOTILAL OSWAL FINANCIAL SERVICES, MUMBAI
"Overall, the new data suggests a continuation of the combination of weak growth and higher inflation. Our economic activity index suggests that October 2019 was the worst month on the current cycle but things have improved in November 2019. It is hard to tell yet if the recovery is strong enough to lead to more than 4.5% growth in the third quarter of FY20."
RUPA REGE-NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCIAL SERVICES, MUMBAI
"Today's IIP-CPI mix clearly signals that India is entering into a kind of 'Stagflationary' phase. This certainly vindicates the RBI's pause in rate cutting cycle."
MADAN SABNAVIS, CHIEF ECONOMIST, CARE RATINGS, MUMBAI
"There is no clarity on what the right inflation number is... From January onwards there would be moderation in inflation as the onion crop comes in which will then open the doors for rate cuts. However, we may not expect rate cuts to work as the problem is on the demand side and monetary policy has reached its limit and we may be in a liquidity trap."
SUJAN HAJRA, EXECUTIVE DIRECTOR, CHIEF ECONOMIST, CO-HEAD - RESEARCH, ANAND RATHI SECURITIES, MUMBAI
"At over 5.5% retail inflation is clearly much ahead of our expectations. But this is again due to the non-core part, mainly vegetables. Core inflation remains benign and trending downwards."
"The IIP number, although in negative, is better than expected given that there were several holidays in October when factories were shut. This reflects a reasonably good festive sales and perhaps clearing of inventories."
"While large part of food inflation is likely to soften over the next two months, we expect the trend inflation to remain elevated. Average inflation in 2020 at 4-4.5% range would be much higher than in 2019."
"With the likely bottoming of growth and elevated inflation as well as concerns on large fiscal slippages, the policy rate may remain in hold in FY20."
SUVODEEP RAKSHIT, SENIOR ECONOMIST, KOTAK INSTITUTIONAL EQUITIES, MUMBAI
"CPI inflation in November continued to be impacted by higher food inflation. This is primarily due to supply-led higher prices of vegetables and pulses."
"Core inflation at around 3.4% remained benign implying that demand-led inflation remained low. Over the next few weeks, part of the food inflation will be favourably impacted as new supply of vegetables hits the market."
"However, this will be offset partially by higher telecom prices from December onwards. Overall, inflation is likely to remain above the 4% mark for most part of next year unless a drastic reduction in food prices is seen in December-January."
"Based on the RBI's MPC thought process on the latest policy response, and our expected evolution of the inflation trajectory, the MPC is unlikely to cut repo rate in the February policy and possibly in subsequent policies too."
RAHUL GUPTA, HEAD OF RESEARCH - CURRENCY, EMKAY GLOBAL FINANCIAL SERVICES, MUMBAI
"India's November inflation has surged to a 40-month high of 5.54%, that is a 130 basis points higher that RBI's medium-term target of 4%. This is mainly due to substantial increase in food prices. While October IIP print still remains in contraction at -3.8%."
"At this month's policy, RBI refrained from cutting rates due to uptick in CPI despite slow growth. If inflation continues to rise further, then RBI may continue to maintain a pause at the February policy."
PRITHVIRAJ SRINIVAS, CHIEF ECONOMIST, AXIS CAPITAL, MUMBAI
"Current trends indicate that CPI inflation will peak out at 5.8% in January 2020 with inflation easing to 5.5% by March 2020. However, we could be surprised by the speed of the decline given that the upturn has been mainly led by volatile vegetables."
"Once headline CPI begins to peak and shows a sustained trajectory towards 4%, the central bank would be more willing to use up remaining rate cut space (we estimate 65 bps) to support growth. I believe that the (rate cut) pause will be temporary given that growth remains below potential."
"A fiscal stimulus that is designed to boost household confidence is needed now to address the demand slump and support leveraged consumption. Both the corporate tax cut already delivered and anticipated personal tax cut is likely to cost the government over 1% of GDP. We expect the government to breach this year's fiscal deficit target by at least 0.5% of GDP (i.e. 3.3% to 3.8%)."
(Reporting by Chandini Monnappa, Chris Thomas, Nivedita Bhattacharjee, Derek Francis and Philip George in Bengaluru; compiled and edited by Rashmi Aich)