Retail inflation jumps to 7.35% in December, crosses RBI’s comfort level

Marco Green
January 13, 2020

India's retail inflation rate climbed to a 65-month high after it rose 7.35 per cent in the month of December 2019, the data released by the Ministry of Statistics & Programme Implementation (MoSPI) showed.

The inflation in the food basket spiked to 14.12 per cent in December 2019 as against 10.01 per cent the preceding month.

The retail inflation based on Consumer Price Index (CPI) was 2.11% in December 2018 and 5.54% in November 2019.

The median forecast in the Reuters poll of almost 50 economists predicted India's annual consumer inflation rose to 6.2% in December from November's 5.54%. The RBI is mandated to keep inflation between 2-6%, with a margin of 2% on either side. The rising vegetable prices can also be seen as a key reason behind the jump in the retail inflation. It was 10.01 per cent in November 2019. Onion prices - an important food in Indian households contributed to the surge in food inflation that has picked up steadily since March.

"The upcoming budget in February would be closely watched out for fiscal stance and sector-specific actions". Core Inflation came in at 3.7 per cent. 3. In July 2016, retail inflation was at 6.07%.

RBI's next monetary policy review is scheduled for 6 February, a few days after the government presents the Union Budget in the parliament for the financial year 2020-21. "The single biggest factor for this increase in the headline inflation is onions. However, weak demand conditions have kept core-CPI and rural wages soft, second round effect of the food-supply shock on wages is unlikely and the RBI has rightly reiterated space for future monetary policy action", Balasubramanian added.

Other reports by Click Lancashire

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