Vegetable prices up 60 percent, retail inflation hits 5-year high
Retail food prices, which make up nearly half of the India’s inflation basket, increased 14.12% in December from a year earlier, against 10.01% in November.Updated: Jan 13, 2020 21:23 IST
India’s annual retail inflation has accelerated to its highest level in more than five years, mainly driven by food prices that rose by 14.12 per cent, official data showed. As per the data released by National Statistical Office (NSO) on Monday, the spike in inflation in the vegetable segment was 60.5 per cent during the month compared to December 2018.
Retail food prices, which make up nearly half of the India’s inflation basket, increased 14.12% in December from a year earlier, against 10.01% in November. Some vegetable prices, including prices of onions that are a staple in Indian cooking, have increased more than four-fold since June.
Economists say that rising headline and food inflation would soon feed into core inflation - stripping out food and fuel prices - which has remained much lower, according to news agency Reuters.
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.
Furthermore, meat and fish prices rose 9.57 per cent, eggs became dearer by 8.79 per cent and the overall price of food and beverages category was up 12.16 per cent.
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%.
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.
Last month, RBI in its monetary policy review statement had predicted the CPI-based inflation to rise in the coming quarters.
“Going forward, the inflation outlook is likely to be influenced by several factors. First, the upsurge in prices of vegetables is likely to continue in the immediate months; however, a pick-up in arrivals from the late kharif season along with measures taken by the government to augment supply through imports should help soften vegetables prices by early February 2020,” the Fifth Bi-monthly Monetary Policy Statement, 2019-20 said.
“Second, incipient price pressures seen in other food items such as milk, pulses, and sugar are likely to be sustained, with implications for the trajectory of food inflation. Third, both the 3-month and 1-year ahead inflation expectations of households polled by the Reserve Bank have risen and these latent sentiment upsides are being reflected in other surveys as well.”
The data also indicated that retail inflation has breached the medium-term target of the RBI to contain CPI inflation within 4 per cent with a band of +/- 2 per cent.