DELHI ( Web News )
India’s retail inflation accelerated to 6.01% in January, the upper limit of the Reserve Bank of India’s tolerance band, driven by rising prices of food and manufactured items.
The inflation, as measured by the consumer price index (CPI), rose to 6.01% in January on an annual basis, the highest in seven months, from a revised 5.66% in December and 4.06% in January 2021, showed government data on Monday.
Inflation is climbing across the world and India is no exception but price rises have stayed relatively tame by historical standards, allowing the central bank to leave interest rates unchanged for now.
Still, prices of daily consumables like tea, cooking oil, pulses, among others, have increased by 20%-40% since the beginning of the COVID-19 pandemic.
Reserve Bank of India on Thursday said CPI inflation is expected to come well below its upper tolerance level, at 4.5%, in the next fiscal year beginning April 2022, helped by fresh crop arrivals, supply-side interventions, as well as prospects of a good monsoon.
However, the hardening of crude oil prices presents a major upside risk to the inflation outlook.
RBI retained its inflation projection at 5.3% for the current financial year.
“The inflation reading came in line with our expectations. The Reserve Bank of India (RBI) too was expecting the reading to be around the upper limit. However, the trajectory is expected to have peaked out in January. More so, RBI’s own H2 FY23 estimates remain closer to 4%, although lower than our estimates, thereby not warranting any concern on policy changes,” said Upasna Bhardwaj, senior economist, Kotak Mahindra Bank, Mumbai.
Earlier on Monday, RBI governor said, “Today’s inflation print is expected to be around 6%. So that should not surprise or create any alarm, because we have taken that into consideration.”
“… If you look at the momentum of inflation, right from October onwards, last October onwards, the momentum of inflation is on the downward slope,” Shaktikanta Das said.
Unveiling the last monetary policy for the current fiscal year, Das on Thursday said core inflation remains elevated at tolerance-testing levels. Although the continuing pass through of tax cuts relating to petrol and diesel last November, would help to moderate the input cost pressures to some extent, he said.
Retail inflation had risen to a five-month high of 5.59% in December, from 4.91% in November, mainly due to an uptick in food prices.
MPC has been given the mandate to maintain annual inflation at 4% until March 31, 2026, with an upper tolerance of 6% and a lower tolerance of 2%.
“The increase in inflation in December was entirely due to an unfavourable base effect despite month-on-month decline in prices. Large buffer stocks of cereals and effective supply side measures augur well for food inflation.
Core inflation remains elevated but demand pull pressures are still muted. The renewed surge in international crude oil prices however needs to be closely monitored,” RBI Governor Shaktikanta Das said in his statement.
“The transmission of input cost pressures to selling prices remains muted in view of the continuing slack in demand. Further as risks from Omicron (virus) wanes and supply-chain pressures moderate, there could be some softening of core inflation.
“On balance, the inflation projection for 2021-22 is retained at 5.3%, with Q4, that is the current quarter at 5.7% on account of unfavourable base effect that eased subsequently,” Das said.