India's headline inflation rate decreased to 5.48% in November, marking a decline from the 14-month high of 6.21% observed in October. This figure was also lower than the 5.53% that economists had anticipated.
The Reserve Bank of India (NS:BOI) (RBI) maintained its interest rate at 6.5% during its monetary policy meeting last week, a decision that followed a slower economic growth rate. The country's GDP growth for the second fiscal quarter ending September was 5.4%, which was not only below economists' expectations but also neared a two-year low.
Although the RBI does not issue monthly inflation forecasts, it has projected that the headline inflation rate will reach 5.7% for the third fiscal quarter ending in December. The central bank's full-year inflation forecast stands at 4.8% for the fiscal year ending March 2025.
Looking ahead, the RBI anticipates a decrease in food inflation in the fourth fiscal quarter, due to the expected seasonal drop in vegetable prices and the arrival of the autumn harvest. Favorable soil moisture and reservoir levels are also predicted to support the production of winter crops.
Agriculture significantly influences India's GDP and food prices, which are tracked by the consumer food price index, are a crucial factor in the nation's inflation measurements.
The RBI has warned that adverse weather conditions and an increase in international agricultural commodity prices could push food inflation higher. On December 6, the central bank noted that businesses expect input cost pressures to stay high and anticipate a rise in selling prices starting from the fourth fiscal quarter.
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