Published: Fri, February 14, 2020
Economy | By

Retail inflation hits near six-year high at 7.59% in January

Retail inflation hits near six-year high at 7.59% in January

According to government data, the output of 16 of the 23 industry groups in the manufacturing segment - which makes up over 75% of the index - contracted in December 2019.

According to data released by the Central Statistical Office (CSO), all-India inflation rate based on CPI (Consumer Price Index) rose to 7.59 per cent in January as against 7.35 per cent in December 2019 and 1.97 per cent in January a year ago.

Electricity generation also dipped 0.1 per cent as against a growth of 4.5 per cent in December 2018.

The IIP growth during April-December period of the current fiscal decelerated to 0.5 percent from 4.7 percent expansion in the same period of 2018-19.

The Index of Industrial Production (IIP) recorded a negative growth of 0.3% in December in comparison to the same month the previous year, according to the National Statistical Office (NSO).

Food inflation, however, had contracted in January 2019 with a print of (-) 2.24 per cent.

Consumer durables and non-durables recorded growth of (-) 6.7 percent and (-) 3.7 percent respectively.

The wholesale price inflation (WPI) for January stood at 3.1 percent.

"The sharp spike in food inflation has led India's Jan CPI to breach a six-year high of 7.59 per cent compared to 7.35 per cent seen in December".

Prices of meat and fish came in at 10.5 percent in January against 9.5 percent month ago.

While inflation in food articles slowed to 11.5% from 13.24% in December and in onion to 293.3% from 455.8%, that in potato, was 87.8% in January vis-a-vis 45% in December.

The inflation in non-food items for January came in at 7.05 percent against 7.72 percent a month ago. The surge in the rate of retail inflation also poses a real challenge for the monetary policy-makers to find innovative means like using CRR (cash reserve ratio) through incremental lending, so that more liquidity can be provided for consumption.

The core wholesale inflation for January saw a contraction of 1 percent against a contraction of 1.5 percent a month ago.

"The timing and magnitude of the next rate cut will depend on how quickly inflation appears to be reverting back towards 4 per cent".

In light of growing inflation and continuing economic slowdown, RBI's Monetary Policy Committee (MPC) has kept its repo rate unchanged at 5.15 per cent.

This is the second straight month in which retail inflation has breached the upper-end of the Reserve Bank of India's (RBI) comfort level of 2%-6%.

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