Retail inflation, as measured by the consumer price index, rose 5.55% in November 2023 from a year ago, up from 4.87% in October, but slightly below expectations.

Core inflation, which strips out volatile items, such as food, fuel and energy costs, continued to decline at 4.1%, data released by the ministry of statistics and programme implementation showed. In November 2022, retail prices increased 5.88%.

Food prices in the month, as measured by the combined food price index, a sub-component, ticked up sharply to 8.70% year-on-year, compared to a rise of 6.61% in October. Food articles account for nearly half of the consumer inflation basket.

Inflation rose higher in rural India at 5.85% in November than 5.26% in urban centres, according to the data.

Among major segments, cereal inflation in November stood at a staggering 10.27%. while vegetables rose 17.70%, according to the data. Pulses, another key group of essential items, went up 20.23%. Fuel and light inflation dropped 0.77%, while housing prices rose a moderate 3.55%. Footwear became expensive by 3.29%.

Most analysts expected India’s retail prices to have increased further in November. The consumer price index likely rose to 5.8% in November, a poll of 23 economists by HT’s sister publication Mint said.

“Core inflation is currently reaching the RBI’s target. The RBI’s caution (in not bringing down key interest rates) is warranted given the substantially larger weight of food products in India’s retail basket,” Sujan Hajra, chief economist at Anand Rathi Stocks and Shares.

The central bank, which has kept the key policy rate unchanged over the past four meetings, expects inflation to average 7% in 2023-24, higher than the 6.7% recorded in the previous year.

Tuesday’s numbers showed inflation has been higher than the RBI’s medium-term target of 4% for over 50 months.

Yet an overall pattern of strong growth, double-digit growth in industrial output and lower non-food inflation signals a robust economy, which nevertheless faces continued risks of volatile food items due to adverse weather conditions.

Higher costs of food impact poorer households more than the well-off since the former tend to spend a larger share of their monthly budget on food items.

India is vulnerable to food-price shocks from extreme weather events and global factors despite a recent moderation in prices, RBI governor Shaktikanta Das warned last month, stating that the central bank will continue to be vigilant against “sources” of inflation.

“In these circumstances, monetary policy remains watchful and actively disinflationary to progressively align inflation to the target, while supporting growth,” Das had said.

Das also told a conference in Japan in November that India, the world’s fifth-largest economy, could face “recurring and overlapping” food-price shocks.

“The inflation print inched up in November as expected but was lower than our expectations. Food inflation was the major driver for inflation,” said Sakshi Gupta, principal economist, HDFC Bank.