Retail inflation at 5-yr high, crosses RBI’s comfort zone on soaring food prices
Core inflation – the non-food non-fuel component of CPI basket – has also increased marginally after declining for four consecutive months, even as the headline numbers were rising.Updated: Jan 13, 2020 18:45 IST
Retail inflation soared to 7.35% in December 2019, highest since July 2014, mainly because of high food prices, particularly on the back of vegetable prices that saw a year-on-year jump of over 60%, official data said on Monday.
The food inflation rose to 14.12% in December 2019 compared to (-) 2.65% in the same month of 2018 and 10.01% in November 2019, according to the Consumer Price Index (CPI) data, released by the Ministry of Statistics and Programme Implementation (MoSPI).
Core inflation – the non-food non-fuel component of CPI basket – has also increased marginally after declining for four consecutive months, even as the headline numbers were rising.
The retail inflation surpassed the Reserve Bank of India’s (RBI) comfort level of 4% with a margin of 2 percentage points on the either side. It was contained within the RBI’s comfort level until previous month (5.54% in November 2019). The retail inflation in December 2018 was 2.11%.
A Reuters poll of economists had expected the CPI to grow at 6.2% in December.
Blaming vegetable, meat and fish prices for the high food inflation, CARE Ratings Ltd chief economist Madan Sabnavis said that inflation should come down in January with the new onion crop in and prices moving down. However, low base effect will impact inflation for one more month, he added.
“Given that the fiscal picture will be known on February 1 and the revised numbers not on target, and with CPI inflation being above 4% in the last three months and core inflation inching up, the RBI will take another pause on interest rates on February 6,” he said.
The Union budget for 2020-21 is scheduled to be presented on February 1.