Inflation may have cooled a tad in December

India’s retail inflation is likely to have eased a bit from November’s 5.5% mark amid a mildly lower uptick in essential commodities’ prices even as the average cost of home cooked vegetarian and non-vegetarian meals rose 6% and 12% compared to last year.

As per Crisil’s monthly food plate tracker, on a month-on-month basis, a vegetarian meal’s cost eased 3% in December, aided by a 12% sequential drop in tomato and onion prices, while a non-vegetarian meal’s price rose 3% to hit a 16-month high of ₹63.3 thanks to a surge in broiler prices.

Compared to December 2023, last month saw a 22.4% rise in tomato prices, while potato prices rose over 52% and onions become 1.2% cheaper, as per the Bank of Baroda Essential Commodities Index that tracks 20 food items. The index was up 5.4% in December, compared to 5.5% in November.

Aditi Gupta, an economist at the bank, estimated that Consumer Price Inflation moderated to 5% in December. Edible oil prices continued to harden in December, led by sunflower oil (up 23.8%), mustard oil (23%) and soya oil (16.2%), as per the bank’s price tracker.

However, 12 of the commodities in the index reported inflation of under 4%, with rice slipping into deflation (-0.5%) and five other commodities continuing to record an year-on-year dip, including Masoor Dal (-5%), Moong Dal (-1.9%). Vanaspati prices shot up 15.8%, the highest pace in this financial year, while Gram Dal prices rose 12.6%.

Attributing a bulk of the 6% rise in vegetarian meal costs to pricier tomatoes and potatoes, Crisil’s Roti Rice report for December said this was fuelled further by a 16% jump in vegetable oil prices due to the import duty hike, coupled with higher demand during the festive and wedding seasons.

These spikes were partially offset by an 11% on-year drop in LPG fuel cost (to ₹803 per 14.2 kg LPG cylinder in Delhi from ₹903 last year), the Crisil Market Intelligence and Analytics report noted.

The 12% increase in non-vegetarian meal costs was driven by an estimated 20% spurt in the price of a broiler, that constitutes about 50% of the cost. The sharp surge in broiler prices was triggered by a low base from last year when production was higher – as well as production dip last month due to a cold wave in the north. “This, coupled with a rise in festive- and wedding-season demand, along with an elevated feed cost, exacerbated the woes,” Crisil analysts reckoned.