Retail inflation close to double digits in November

Last Updated: Thu, Dec 13, 2012 03:20 hrs

Retail inflation touched 9.90 per cent in November, year-on-year, up from 9.75 per cent in October. The uptick was driven primarily by the continued price rise of food and clothing items. Fat-rich items and sugar contributed the maximum to the price increase at 17.67 per cent and 16.97 per cent, respectively. Prices of vegetables, pulses and cereals grew at the rate of 14.74 per cent, 14.19 per cent and 12.35 per cent, respectively.

The high inflation might make the Reserve Bank of India cautious ahead of the quarterly review of the monetary policy on December 18. Inflation in rural areas was at 9.97 per cent, staying pretty close to 9.98 per cent in the previous month.

However, in urban areas, retail inflation went up marginally from 9.46 per cent in October to 9.69 per cent in November. Stubborn inflation numbers have been preventing RBI for a long time from reducing interest rates.

In its recent review of the monetary policy, RBI had expressed concern over this. However, it reduced the cash reserve ratio by 25 basis points, bringing it to 4.25 per cent, to infuse additional liquidity into the financial system.

Attributing the slowdown in industrial production, various sections of the economy, especially industry lobby groups, have been calling for reduction in interest rates.

More recently, even Finance Minister P Chidambaram expressed concern over the RBI's decision to not reduce the key policy rates. The repo rate, at which RBI lends to banks, is 8 per cent at present, while the reverse repo, at which the RBI absorbs excess liquidity through borrowings from banks, is at seven per cent.

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