Published: Mon, January 13, 2020
Economy | By

Retail inflation spikes to 7.35% in December from 5.54% in November

Retail inflation spikes to 7.35% in December from 5.54% in November

The inflation rose mainly due to a sharp rise in prices of vegetables that saw a 60.5 per cent on-year rise in December 2019. A poll of 37 economists had estimated consumer price inflation to be at 6.7% in December 2019, Bloomberg reported. Last month, onion prices - an important food in Indian households - soared tenfold, contributing to a surge in food inflation that has picked up steadily since March. Overall, the inflation rate of the food and beverages category was 12.16%.

Retail inflation based on consumer price index (CPI) accelerated to 7.35 per cent in December past year as against 5.54 per cent in November mainly on account of rising vegetable prices, government data showed on Monday.

Central bank chief Shaktikanta Das said just last week that price stability is the Reserve Bank of India's primary objective as continuing high inflation disproportionately affects India's poorest.

This is the highest retail inflation recorded in India after five years. The RBI is mandated to keep inflation between 2-6%, with a margin of 2% on either side.

In November 2019, retail inflation was recorded at 5.54%, up from 4.62% in October. The pulses and products segment saw a rise of 15.44 per cent, while that of meat and fish rose 9.57 per cent and egg prices gained 8.79 per cent.

The RBI, which mainly factors in the CPI based inflation, is scheduled to announce its next bi-monthly monetary policy on February 6. A rate increase is typically expected to curb inflation when prices are on the rise.

Inflation was pushed up by a rise in food prices and telecom tariffs. This is the first time since July 2016, when the the central bank's monetary policy committee (MPC) changed its stance and undertook an inflation targeting approach that the target has been breached. "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.

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