CPI Inflation - Disinflation Process Intact :: Edelweiss, link

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CPI inflation in November declined to ~4.4% YoY (Edelweiss estimate: ~4.5%) versus ~5.5% in October. While food inflation tumbled nearly 200bps, core disinflated ~40bps. Undoubtedly, the base effect advantage was significant within food in November; but even adjusting for that, food inflation plunged. As regards core CPI, the dip was across categories with transportation segment contributing the maximum on account of fuel price cuts. Overall, the key message is that the disinflation process is intact. Going ahead, we expect inflation to rise as base effect advantage erodes, but the rise will still be benign, with headline CPI climbing to over 5.5% in December.

We reiterate that the four exogenous factors central to India’s inflation episode of last couple of years (government’s food policies, international food prices, fuel prices and exchange rate) are all reversing sharply at the same time. This should keep inflation under check even as growth begins to pick up gradually.

LINK
https://www.edelweiss.in/research/CPI-Inflation--Disinflation-Process-Intact/27821.html