October's 6.09% is an onion number: one item with a 0.70% weight added about 0.52 percentage points, and without it the print would have been about 5.59%, inside the band. The monetary worry is core, at 4.51%. I resurrect my 2013 P-O-T demand, ask what became of it, and re-advance my Low Cost Economy mechanism: capping annual wage and salary increases at 75% of the previous year's GDP growth.
On 12 November, MoSPI put October's CPI inflation at 6.09%, against 5.54% in September. The Times of India's report of 13 November has it right: the first breach of the RBI's 6% upper tolerance limit in two years, with food inflation at 8.9% and onion prices 116% higher than a year earlier.
A day earlier, The Signal had done the arithmetic almost nobody led with:
Weight that change against the whole basket and onion added about 0.52 percentage points to the 6.09% headline. Remove it and October inflation would have been about 5.59%, below the 6% upper tolerance level.
The figures, from MoSPI item weights and indices as calculated by The Signal on 12 November:
- Onion's weight in the CPI basket: 0.7006 out of 100
- Onion inflation, October: 116.22%
- Its contribution to the 6.09% headline: about 0.52 percentage points
- October without onion: about 5.59%, inside the 2-6% band
The number monetary policy can actually reach sits underneath. Core inflation, excluding food and fuel, was 4.51% in October, from 4.33% in September and 4.16% in August; strip out gold and silver and it was 3.78%, up 0.87 points in two months (The Signal). Three months of rise is what the MPC will stare at, not a bulb.
I have been here before. In "SOS to SOS to SOS!" (23 October 2013) I asked for a daily P-O-T — Potato at Rs 3 a kilo, Onion at Rs 2, Tomato at Rs 1 — written into the Food Security Bill, and waited to see who would pick it up. Thirteen years later the same basket answers: potato is down 14.24% and onion is up 116.22% (TOI, 13 November). The vegetable never failed. Nothing changed in the way costs and wages chase each other, so the price did the only thing it could.
Which is why I go back to "Japan's Secret of success: Frozen Wages?" (31 July 2025). My suggestion, then and now: reduce the cost of inflation by limiting annual wage and salary increases to 75% of the preceding year's GDP. If GDP grew 8%, the maximum increment is 6%. Adopt it voluntarily, starting at the top of the pay ladder. A rate hike reacts to a price; a wage norm reaches the spiral that turns one onion into a wage demand, and a wage demand into next year's price. I will not pretend it is painless or quick.
The calendar is tight. The MPC meets from 2 to 4 December, and after October's 25-basis-point rise the repo stands at 5.50% — below 6.09% inflation, so the real policy rate is negative and a fixed-deposit saver earns less than prices are rising. A December hike would show up in home and car EMIs (EcoNiti, 13 November). What it would not do is start the legal clock: the target is failed only when average inflation stays above 6% for three consecutive quarters, and one month does not do that (The Signal).
Rates cannot grow onions, and no committee in Delhi can. What can be done is stop a food shock from settling into a habit — and the cheapest place to begin is the increment letter that goes out every April. I would rather see that tried once, honestly, than another quarter of tightening that leaves the spiral intact.
With regards,
Hemen Parekh
www.Iam-Immortal.ai / www.IndiaAGI.ai / www.YourContentCreator.in
13 Nov 2026
No comments:
Post a Comment