India's retail inflation eased to 2.3 percent in November, according to data released by the government on December 12. It stood at 4.88 percent in November last year and was 3.31 percent in October.

CPI is the main price gauge that the Reserve Bank of India (RBI) tracks.

The central bank last week trimmed H2FY19 (October-March) inflation forecast to 2.7-3.2 percent from 3.9-4.5 percent earlier. It pegged H1 FY20 (April-September) inflation at 3.8-4.2 percent.

As per minutes of the Monetary Policy Committee meeting held on December 5, former RBI Governor Urjit Patel said that broad-based weakening of food prices and the sharp decline in international crude oil prices imparts a downward bias to the headline inflation trajectory going forward.

However, he also acknowledged that there has been a broad-based increase in inflation in the non-food group.

Led by deflation in food items, softening crude oil prices and relatively stable domestic currency, the central bank kept key policy rates unchanged last week.

Consumer food price index recorded de-growth of 2.61 percent in November, from (-) 0.86 percent in October, mainly driven by cheaper vegetables, eggs, pulses and sugar.

Prices of vegetables witnessed a negative growth of (-) 15.59 percent versus (-) 8.06 percent a month ago.

Similarly, pulses continued witness deflation and contracted (-) 9.22 percent in November from (-) 10.28 percent a month ago and that of sugar grew (-) 9.02 percent.

“The sharp easing in the headline CPI inflation to a lower than expected 2.3 percent in November 2018, reflects a combination of favorable factors such as the correction in retail fuel prices, discomfiting factors such as a deeper disinflation in food prices, and base effects related to the waning impact of the HRA revision for central government employees. In our view, factors such as weak post-monsoon rainfall and lagging rabi sowing cast some doubt on how long food prices would remain in the disinflation zone,” said Aditi Nayar, Principal Economist at ICRA.

Fuel and light inflation for November was at 7.39 percent compared to 8.55 percent month on month, while housing inflation was 5.99 percent versus 6.55 percent MoM.

Experts expect inflation to remain to be benign in the next few months, with momentum for a rate cut by the central bank picking up.

“We expect CPI to remain below 4 percent till April-June 2019-20. We also expect a change in monetary policy stance to “neutral” from “calibrated tightening” in the February policy and expectations of a rate cut will now start building,” said B Prasanna, Head, Global Markets Group, ICICI Bank.

“However, we should remain cautious as CPI could pick up sharply towards October-March (2019-20),” he said.