India’s recent November CPI of 4.9% was below consensus and our expectation but there is higher divergence in certain components of CPI more recently when compared with real-time and WPI data. This is particularly visible in the ‘Fuel and Light’ category for LPG, petrol, electricity, etc.

The official November CPI for the Fuel and Light basket also had a larger-than-usual downward gap vs. when aggregated from its components.

Further, core inflation has remained high and sticky but this is now more broad-based and clearly visible in various alternative measures. Various factors (telecom tariff hikes, GST rate hikes, oil price, services inflation, etc.) can push the future CPI trajectory upward too.

The spread of Covid infections and the Omicron variant could have its impact but will be on growth as well as inflation.