Driven by food prices increase, CPI Inflation rises to 5.41 percent in November

The consumer price index (CPI) based retail inflation rose to 5.41 per cent in November 2015 as compared to 5 per cent in October 2015. On yearly basis, the CPI inflation rose from 3.27 per cent in November 2014 to 5.41 per cent in November 2015. The increase is in line with the Reserve Bank of India's (RBI) expectations of 5.4 percent increase.

The rise in inflation is driven by an increase in food prices which had a weight of 46 percent in CPI. In November 2015 the consumer food price index (CFPI) rose by 6.07 per cent as compared to an increase of 5.25 per cent in October. The increase in CFPI is mainly driven by rise in Cereals and pulses particularly; both has a combined weight of 12 per cent. The continuous rise in food prices is on the back of poor monsoons in two consecutive years.

The price of other constituents of CPI, Tobacco and intoxicants increased by 9.50 per cent year on year (Y-o-Y), Clothing and footwear by 5.76 per cent. Housing by 4.95 per cent, Fuel and light by 5.28 per cent. Miscellaneous by 3.78 per cent Y-o-Y.

The CPI is continuously increasing from last 4 months. On yearly basis from 3.69 per cent in July it reached to 3.74 per cent in August. After that it increased to 4.41 per cent in September, 5 per cent in October and to 5.41 per cent in November.

The RBI was expecting to bring inflation at 5 per cent by FY 2017 but now given the upside risks emanating from the seventh pay commission and successive two poor monsoons the inflation risk has increased. This can effectively rule out chances of an interest rate cut in near future.