India’s retail inflation marginally slowed to 5.07 percent in January, as prices of fruits, vegetables and oil prices slightly eased,
India’s retail inflation marginally slowed to 5.07 percent in January, as prices of fruits, vegetables and oil prices slightly eased, data released by the Central Statistics Office showed.
Retail inflation, measured by Consumer Price Index (CPI) hit a fresh high, growing 5.2 percent in December, mainly due to hardening housing, fuel and food prices, while inching towards RBI’s upper tolerance level of inflation at 6 percent.
CPI is the main price gauge that the Reserve Bank of India (RBI) tracks, crucial for implementation of monetary policy.
CPI number for January is in line with the RBI’s estimated inflation at 5.1 per cent for the quarter ended March, up from its previous forecast of 4.3-4.7 percent. Last week, the apex bank estimated the retail inflation for 2018-19 in the range of 5.1-5.6 percent during April-September and 4.5-4.6 percent in the second half of the year.
“Inflation numbers for January are modestly lower mainly due to moderating food, while higher oil and rent allowance limit a larger correction in price pressures. Numbers are along RBI's revised projections, with the next six months to stay firm on arithmetic terms i.e due to base effects,” Radhika Rao, India Economist at DBS Bank said.
Consumer food price inflation, a metric to gauge changes in monthly kitchen costs, softened marginally, with prices rising 4.70 percent in January from 4.96 percent in December 2017. Vegetables prices grew nearly 27 percent in January as compared with 29.13 percent a month ago.
“The continued correction in prices of vegetables would dampen food and headline inflation in the ongoing month. The eventual rabi harvest, distribution of the 2018 monsoon and the operationalisation of the proposals made in the Union Budget for 2018-2019 including the launch of Operation Greens and the augmentation of minimum support prices (MSPs), would impact the trajectory of food inflation going forward,” Aditi Nayar, Principal Economist at ICRA said.
Housing inflation grew at 8.33 percent in January, as compared with 8.25 percent in December, while fuel inflation, which has seen an uptick in July, remained unchanged at 7.73 percent in December.
“The staggered impact of the revision in HRA of central government employees on the housing index of the CPI is likely to continue to push up housing inflation to 9-10 percent by June 2018, after which a favourable base effect would contribute to an easing of the same,” Nayar said.
Last week, the central bank’s monetary policy committee (MPC) said that India’s inflation outlook is clouded by several uncertainties on the upside.
It factored an increase in the industrial raw material prices, which would lead to the rising costs passed on to consumers as the economy grows. The committee also took note of the key announcements Union Budget that would affect prices.An increase in customs duty and the increase in fiscal slippage could impinge on the inflation outlook, the committee said, while expressing concerns of the revision in guidelines for the MSPs of kharif crops, acknowledging that the exact magnitude of the move could not be properly assessed at this stage.