Published: Wed, February 13, 2019
Economy | By

Retail inflation cools further to 2.05% in January on easing food prices

Retail inflation cools further to 2.05% in January on easing food prices

In January, food disinflation, or a fall in food prices, persisted for the fourth consecutive month.

Retail inflation declined marginally to 2.05 per cent in January over the previous month on continued decline in food prices, including vegetables and eggs, said government data on Tuesday.

December's growth was much faster than a downwardly revised 0.3 percent year-on-year increase in November, the data showed.

Factory output growth slowed to 2.4 per cent in December from 7.3 per cent a year ago primarily due to slippage in output of manufacturing, mining and capital goods, data released by Central Statistics Office (CSO) Tuesday showed. Inflation for the "fuel and light" category moderated to 2.20 per cent in January from 4.54 per cent a month ago.

In a surprise move on February 7, the Reserve Bank of India's Monetary Policy Committee (MPC) cut the benchmark repo rate 25 basis points to 6.25 percent, in its first cut in 18 months, and hinted of more room to cut rates.

This is the sixth straight month where the inflation has remained below the RBI's medium term target of 4 per cent. Consumer inflation in December was revised downwards to 2.11 per cent from 2.19 per cent, according to the official statement. India imports almost 80 percent of oil it consumes. Consumer non-durable goods growth was at 5.3 per cent in December compared with 16.8 per cent growth in the year-ago period. B Prasanna, head, Global Markets Group, ICICI Bank said, "The CPI number surprised positively and core inflation also moved lower".

For now, headline inflation eased further as food prices extended their fall, albeit at a slower pace.

Shaktikanta Das, the RBI's new governor, voted for a cut despite only weeks earlier acknowledging the challenges posed by the divergent paths taken by core and food inflation.

A Reuters poll of 30 economists had predicted CPI to have accelerated to 2.48 per cent in January. At 2.05 per cent, inflation in January was lower than economists' expectations. The central bank also changed its policy stance to "neutral" from "calibrated tightening", a shift that allows it to act either way on the key rates.

Like this: