Image for representation purpose only. , Photo Credit: V. Raju
A sharp 15.1% drop in vegetable prices in December 2022 brought India’s retail inflation to a 12-month low of 5.72% – taking it below the central bank’s 6% tolerance limit for the second straight month after a ten-month streak kept.
However, there was little relief beyond vegetables as inflation in food articles such as cereals, milk, spices rose to 13.8%, 8.5% and 20.3%, respectively. For rural consumers, inflation remains high at 6.05% with food prices rising by over 5% compared to only 2.8% in urban India.
“Retail inflation, excluding vegetables, rose from 7% in November to 7.2% in December due to rising prices of cereals, pulses, milk, meat and fish and fuel,” said Dharmakirti Joshi, chief economist at CRISIL. Core inflation, which excludes food and energy, rose to 6.1% from 6% in November, which he termed as the ‘biggest concern’.
Among services, inflation remained high for personal care and effects (8.1%), household goods and services (7.43%), miscellaneous and health services (6.1%). Fuel and mild inflation stood at 11 per cent in December, while the cost of clothing and footwear rose by 9.6 per cent.
‘Nearly escape’
“Worryingly, core CPI inflation has remained above 6% with evidence of higher inflation in the services sector,” said Rajni Sinha, chief economist at CARE Ratings. The Reserve Bank of India’s Monetary Policy Committee (MPC) meeting in early February to determine whether more rate hikes are warranted to pacify them will be ‘a close call’ amid sticky core inflation, he said. Told.
Consumer price inflation could still slide back to 5.8%-6% this month, warned Aditi Nayar, chief economist at ICRA, as food inflation will have an ‘unsupportive base’ and core inflation is expected to rise this quarter, with producers At high cost and strong demand for services living near.
“Considering the lower-than-expected inflation print and muted average industrial production growth of 1.3% during October and November 2022, we anticipate that the MPC may opt for a pause in February,” Ms Nair said.