Retail inflation rises 2nd month in row, highest in 6 years

Retail inflation based on the consumer price index stood at 7.35% in December 2019 and was 1.97% in the month of January last year

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In January, retail inflation rose to 7.59% in January for the second consecutive month as food items such as vegetables, pulses and meat, fish became costlier. This is a five-and-a-half-year high level of retail inflation. Earlier it was 8.33% in May 2014.

According to government data, retail inflation based on the consumer price index stood at 7.35% in December 2019 and was 1.97% in the month of January last year. According to data from the National Statistical Office, if food inflation is to be accounted for in retail inflation, it was 13.63% in January 2020 as compared to 14.19% in December 2019 a month ago. However, in January 2019 it recorded a decline of 2.24%. Retail inflation was declining throughout 2018.

In the case of vegetables, inflation rose to 50.19% on an annual basis in January this year, while inflation in pulses and products made up by 16.71%. Inflation of more protein-rich foods such as meat and fish was 10.50%, while egg prices jumped 10.41%.

According to the data, the food and beverage category inflation was 11.79%. Houses became costlier by 4.20% in January 2020, while inflation in the fuel and light category stood at 3.66%.

ICRA Principal Economist Aditi Nair said, “Food inflation is worrying given the rise in prices in various categories. The price of protein-rich foods is expected to remain high. He said that apart from this, the main inflation at 4.1% in January this year is also a cause for concern.

Nair said that despite the rise in retail inflation, the Reserve Bank’s stance on monetary policy is likely to remain soft. This situation can persist until the Monetary Policy Committee sees that the output gap has become negative.

Rahul Gupta of MK Global Financial Services said, “This is the second consecutive month when retail inflation has exceeded the central bank’s inflation target. If inflation persists above 6%, we do not think the Reserve Bank will cut the policy rate in the next monetary policy review.

The Reserve Bank did not make any major policy rate changes this month citing high inflation in the monetary policy review.

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