Mr Suman Chowdhury, Chief Analytical Officer - Acuité Ratings & Research, comments on the CPI Dec'21
India's headline CPI inflation has continued on its uphill climb as per our expectations to 5.6% YoY in Dec-21 vs 4.9% YoY in Nov-21 and 4.5% in Oct-21. This is despite a sequential contraction of 0.4% and is primarily reflective of a lower base factor (CPI - 4.6% as on Dec-20). The sequential food inflation has been negative at 0.9% after rising persistently for 3 months and this is mainly due to the seasonal factor characterised by better availability of vegetables and fruits. The sequential rise has been moderate across most other categories except clothing and footwear.
Nevertheless, core inflation continues to be elevated and estimated at 6.2% for Dec-21, almost at similar levels as in the previous month. High oil albeit slightly moderated and other commodity prices as well as the increasing industrial raw material shortages and its transmission to prices of manufactured products with gradual demand revival, is reflected in the elevated core inflation levels.
We have maintained our CPI inflation forecast of 5.5% for FY22 given our moderate view on food inflation given the crop forecasts and the steps taken by the Government to soften food prices. The upside risks to this forecast, however, may increase if there are further supply chain challenges due to the emergence of the third pandemic wave.