CPI index rises 11.24% YoY

Inflation for the month of November just set another record rising 11.24% YoY at the retail level. Not surprisingly, it did not get that much of a mileage in the popular media which is just obsessed with flimsy stuff. Inflation is acknowledged as as indirect tax on the poor. So by that logic, any government that accepts this alarming level in its tenure is anti – poor. Inflation at the retail level (i.e. CPI) has been closer to 10% since 2009 (coincidentally 2009 the present government came to power).

http://mospi.nic.in/Mospi_New/upload/t4.pdf Food & beverages which constitute 50% of the index witnessed ~ 15% YoY rise in prices, the highest rise amongst the 3 constituents of the CPI, i.e. Food, Fuel and Clothing. Within that proteins constitute ~ 80% of the index with Pulses and Milk contributing 40% and egg, meat and fish contributing 60% to the index. Pulses have witnessed a subdued ~ 1% YoY rise whereas milk saw 9% YoY rise. Egg, meat & fish saw ~ 12% YoY rise in prices. Vegetables witnessed a humongous ~ 60% YoY rise followed by fruits witnessing 15% YoY rise in prices.  

This galloping food inflation has been around for quite some time now. Politicians for the first time, Sonia Gandhi of all the people, acknowledged the crises. May be the mauling the Congress received in the recently concluded state elections, awakened her from her dreams.   

Raghuram Rajan shocked everybody when he actually hiked rates in his first monetary policy review in September 2013 citing high inflation. He is scheduled to review monetary policy next week. A 50 bps hike in rates shouldnt be shocking after all.  

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