Retail inflation quickened to 5.11% in January driven by high food prices, latest price data calculated according to a new method showed on Thursday.
The latest inflation rates, which captures shop-end prices using 2012 as the “base” year and a wider basket of goods, are, however, still lower than the Reserve Bank of India’s threshold level of 6%, rekindling hopes of an interest rate cut by RBI in the coming months.
The December retail inflation based on the consumer price index (CPI), recalculated with the new base year, stood at 4.28%.
The new index attaches a lower weight — 45.86 — to food products compared to 47.58 in the older series, implying that on every `100 spent in a month, people on an average spend `45.86 on food items.
Likewise, housing costs have been given a higher weightage — 10.07 — compared to 9.77 in the older series to mirror higher rental and home loan rates over the years. The sample size for collection of house rent data has been doubled to 13,368 from 6,684 rented dwellings in the old series.
Experts said the new series has also incorporated some methodological improvements that will make the consumer price index a more accurate and less volatile measures of inflation.
“Looking ahead, we expect inflation to average at 5.8% in 2015-16 compared to an estimated 6.5% for 2014-15,” credit rating agency Crisil said in a research report.
Inflation rates in the coming months will largely depend on a host of factors including crude oil prices and summer rains.