With prices of onions, tomatoes alongside cereals and pulses remaining stubbornly high, a vegetarian thali was costlier yearly by 12 per cent in December. Experts said pulse and cereal prices are unlikely to cool down in the near term, impacting the December print of retail inflation.

Retail inflation based on December consumer price index (CPI) data is to come out on January 12, and it is expected to be near the upper tolerance level of the targeted inflation range, i.e. 2-6 per cent. Retail inflation in November was 5.6 per cent.

CRISIL Report

A report by CRISIL released on Monday said vegetarian thali cost was led by a substantial increase of 82 per cent and 42 per cent in prices of onion and tomato, respectively. “Prices of pulses, which account for 9 per cent of the veg thali cost, also increased 24 per cent on-year,” it said. However, the non-veg thali declined 4 per cent on a yearly basis. “The decline in the cost of the non-veg thali was due to a 15 per cent decline in broiler prices on-year amid higher production,” it said.

Data from the Consumer Affairs Ministry showed higher prices of key items in the Indian kitchen. Though prices of edible oils have come down, it is not enough to impact overall food inflation. Some moderation is expected in vegetable prices, but food and overall inflation are likely to rise, at least in December.

Swati Arora, Economist with HDFC Bank, said that food inflation is expected to remain high, driven by higher pulses, cereals and sugar prices, which is likely to exert upward pressure on headline inflation. Besides, weak Rabi sowing progress in pulses is also a concern. On the positive side, moderation in vegetable prices with the onset of the winter season is likely to keep the upside on food inflation in check.

“We expect CPI headline inflation to rise to 5.9 per cent in December and average at around 5.3-5.4 per cent in Q4 FY24,” she said.

CPI basket

Upasna Bhardawj, Chief Economist with Kotak Mahindra Bank, said: “We are looking at headline numbers just a tad below 6 per cent. This is going to be peak probably and then we will see moderation after that. At this time, food inflation is something we should be very watchful about particularly cereals. Despite government intervention, cereals prices remain sticky and it has heavy weight in CPI basket,” she said.

A research report by Quant Eco said that food inflation will continue to steer overall inflation in the next fiscal. “We expect fuel and core inflation to remain largely contained. Pockets of discomfort within food basket continue to linger despite administrative measures (esp. in cereals and pulses). Risks to food inflation remain stacked on the upside amidst anticipated downside to both Kharif and Rabi production and temporary supply disruptions triggered by climate change,” the report said.

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