Stepping pretty close to the double digit mark, the retail inflation in the country went up to 9.90% in November, year on year, against 9.75% in October. The rate of price rise was driven in the month by the continued rising prices of food and clothing items.
Fat rich items and sugar contributed the maximum to the price rise at 17.67% and 16.97% respectively. Prices of vegetables, pulses and cereals grew at a rate of 14.74%, 14.19% and 12.35% respectively.
The high inflation might make the reserve Bank cautious ahead of the quarterly review of the monetary policy scheduled for December 18.
Inflation in rural areas remained close to the previous month of 9.98% at 9.97%. However, in urban areas, the retail inflation went up marginally from 9.46% in October to 9.69% in November.
The stubborn inflation numbers have been preventing the Reserve Bank of India (RBI) for a long time from reducing interest rates. In its recent review of the monetary policy, the apex bank expressed concern over this.
However, RBI had reduced the cash reserve ratio by 25 basis points bringing it to 4.25%, 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 of interest rates.
More recently, even finance minister P Chidambaram expressed concern over RBI’s decision to not reduce the key policy rates.
The repo rate, at which RBI lends to banks, is 8% at present, while the reverse repo, at which RBI absorbs excess liquidity through borrowings from banks, is at eight%.
