Inflation is once again gearing up to increase the financial burden on the common man, while with onion prices surging by nearly 100 percent, pulses, rice, and milk becoming costlier, and the threat of Al Nino intensifying, a major question has arisen across the country. Will inflation rise further in the coming months, and will the Reserve Bank of India (RBI) take a strict decision regarding interest rates in December, directly impacting the EMI of home loans and other borrowings?
Retail Inflation Data And Bank of Baroda Projections
The official retail inflation data for October is scheduled to be released on November 12.54 percent on an annual basis. However, economists at the Bank of Baroda have estimated that retail inflation could climb directly to 6 percent in October. If this happens, concerns regarding inflation will escalate Notably. These figures will prove to be extremely crucial ahead of the Reserve Bank of India's Monetary Policy Committee (MPC) meeting scheduled for December.
Sharp Surge In Prices Of Essential Commodities
1 percent on an annual basis in October. Out of these, the inflation rate of 15 major commodities witnessed a clear rise. 2 percent on an annual basis was recorded in the prices of these essential items, remaining a matter of concern for the economy.
Onion Prices Double Annually
Among various food items, onion prices witnessed the most astonishing and massive surge. 6 percent higher compared to the same month last year. 2 percent in onion prices in October of the previous year, which makes the annual gap appear exceptionally high. Apart from onions, continuous increases were also recorded in the prices of rice, tur dal, urad dal, milk, jaggery, and various edible oils. Tomato prices also increased by 6 percent on an annual basis. 5 percent lower compared to the previous month.
Food Inflation Threat Due To Al Nino And Weather Conditions
Weather fluctuations could emerge as one of the major reasons for the continuous rise in inflation this time. The Bank of Baroda has expressed deep concern over deficient rainfall and changing weather patterns in several key states including Karnataka, parts of Andhra Pradesh, Maharashtra, Telangana, and Rajasthan. These states are considered major producers of tomatoes, onions, and potatoes in the country. According to the report, as of November 2, water levels in various reservoirs across the nation were recorded lower compared to the corresponding period last year. This situation poses a severe threat of adversely affecting the sowing and overall production of upcoming rabi crops. Also, the World Meteorological Organization's November report has warned of the likelihood of a very strong Al Nino during 2027, creating the risk of surging temperatures and severe crises for agriculture and farming.
Will RBI Hike Repo Rate Again In December?
The Reserve Bank of India is keeping a very close and sharp eye on all these recent and alarming inflation figures. 25 percent, meaning 25 basis points, under its monetary policy. 50 percent. Besides, the RBI had also shifted its policy stance towards tightening. Now, during the Monetary Policy Committee meeting scheduled between December 2 and December 4, the country's central bank will face the biggest challenge of effectively controlling runaway inflation. 25 percent hike in the repo rate during the December meeting. However, this is currently an estimate, and no official decision has been finalized yet. If the RBI actually proceeds with a repo rate hike, interest rates on home loans and all other floating-rate borrowings will become expensive, thereby further increasing the burden of monthly EMIs for the common citizen.