HYDERABAD: Retail inflation continued its south sojourn, decelerating to 2.05 per cent in January 2019 from 2.19 the previous month, extending sighs of relief for India’s policymakers. A year before, retail inflation stood at 5.07 per cent in January 2018.
The declining Consumer Prices Index (CPI) is solely driven by falling food prices including fruits, vegetables and pulses, even negating the surge in core inflation, which stood at 6.04 per cent, breaching the RBI’s mandated upper tolerance band for inflation of 6 per cent.
Data released by the Central Statistics Office on Tuesday showed that inflation in the ‘fuel and light’ category also fell to 2.2 per cent in January 2019 from 4.54 per cent in December 2018. On the other hand, stress in non-food and non-fuel items continued to inch up. Showing signs of trouble are healthcare and education inflation, which stood at an alarming 9 and 8 per cent respectively in January. Last week, taking comfort in the broad headline inflation data, RBI not only shifted its monetary policy stance from ‘calibrated tightening’ to ‘neutral’, but also reduced key policy rates by 25 basis points (bps), hoping to drive demand and spur growth. The Monetary Policy Committee further revised its inflation estimates downwards for both the current quarter and next fiscal.
While retail inflation is pegged at 2.8 per cent for the current quarter on account of favourable factors including benign monsoon, for the first half of the next fiscal, it is pegged at 3.2-3.4 per cent from 3.4-4.2 per cent. In all, provided a normal monsoon and favourable fuel prices, at least until December 2019, inflation is expected to be reigned in at 3.9 per cent, allowing room for one or two more rate cuts in the coming quarters.