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Published: December 7, 2023
Updated: December 7, 2023

Barclays' Alarming Prediction: India's Inflation Surge in November

Anticipated CPI Spike:

Barclays signals a potential breach of the Reserve Bank of India's (RBI) 6% tolerance band as India's consumer price index (CPI) is expected to surge from October's 4.87% to an estimated 6.15% in November.

Driving Factors: Escalating Food Inflation:

Barclays identifies the chief culprit behind the inflationary uptick—food prices. With a projected acceleration to 9.2% in November, driven by soaring vegetable prices, the report dissects the impact on essentials like onions, tomatoes, and non-perishable items, notably pulses.

Sectoral Dynamics Unveiled:

While food inflation is on the rise, Barclays forecasts fuel and light inflation to remain in deflation at -1.3% year-on-year for November. In contrast, core inflation is poised to hold steady at 4.3% year-on-year.

Unravelling Core Inflation Trends:

Despite robust domestic demand, core inflation's resilience raises questions. Barclays delves into potential factors, exploring whether it's increased aggregate supply or the repercussions of supply shocks on secondary aspects like wages and transportation costs.

Supporting Metrics: PMI Insights:

Indicators from the Purchasing Managers' Index (PMI) for both manufacturing and services sectors in November point to easing input cost pressures. This sheds light on a potential slowdown in the ascent of selling prices, contributing to the broader evaluation of inflationary trends.

RBI's Dilemma and Expected Approach:

As the RBI approaches its Monetary Policy Committee (MPC) meeting, Barclays predicts a cautious stance. While core inflation stability provides relief, the report underscores the RBI's wariness of elevated food inflation's potential impact on overall inflation expectations.

Inflation remains a concern which is likely to be a deciding factor in MPC meet this week:

Barclays' foresight alerts stakeholders to the intricate dance of inflationary forces in India. As the nation stands at an economic crossroads, careful navigation is imperative for policymakers and RBI to strike a balance amid evolving inflation dynamics.