Retail inflation eases to 3-month low of 5.1% in Jan

Despite the ease in retail inflation, the Reserve Bank of India (RBI) opted to keep interest rates steady last week, indicating a delay in rate cuts to address the inflation target of 4%.
Representative Image.
Representative Image.

NEW DELHI: Retail inflation rate in the country moderated to a three-month low of 5.10% in January due to slower price increases in certain food items, as per the official data released on Monday. It fell from 5.69% in December last year and 6.52% in January 2023 to 5.1% in January 2024.

The consumer price food index (CFPI) decreased to 8.3% in January from 9.5% in December 2023, though higher than what it was in January 2023 at 6%. Cereal prices increased by 7.83% year-on-year in January compared to 9.93% in the previous month, while vegetable prices rose by 27.03% in January, slightly lower than the 27.64% recorded in December.

Despite the ease in retail inflation, the Reserve Bank of India (RBI) opted to keep interest rates steady last week, indicating a delay in rate cuts to address the inflation target of 4%. The RBI projects retail inflation to average 5.4% in the current fiscal year ending in March with the fourth quarter at 5%. It has projected 4.5% for the following fiscal year with the first quarter at 5.0%, the second quarter at 4.0%, the third quarter at 4.6 percent, and the fourth quarter at 4.7%.

“The mild upside surprise on CPI inflation has come on the back of higher-than-expected food inflation, led by higher sequential momentum in eggs, meat & fish and pulses, while cereals remained under pressure despite rising materially in 2023. Vegetable inflation has also remained elevated with sequential contraction being less than the usual seasonal behavior,” said Madhavi Arora, Economist with the Emkay Global Financial Services.

According to Aditi Nayar, Chief Economist, Head Research and Outreach, ICRA Ltd, the correction in the inflation for food and beverages was led by a favourable base effect. While rabi sowing has caught up with last year’s level, reservoir storage remains well below the year-ago levels in most regions, continuing to imbue caution into the outlook for the rabi harvest. “Inflation for the miscellaneous sub-group, which includes various services, fell below 4% after a gap of 49 months, and is expected to remain sub-4% over H1 CY2024, auguring well for the core inflation,” she added.

IIP slows to 3.8% in Dec

India’s industrial production growth slowed to 3.8 per cent in December 2023, mainly due to poor performance of mining and power generation segments, as per official data released on Monday. The factory output growth measured in terms of the Index of Industrial Production (IIP) was at 5.1% in December 2022.

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