Retail Inflation at 6.01% in January, Hits 7-Month High

India’s retail inflation increased to 6.01 per cent in the month of January, driven by higher consumer goods and telecom prices along with a comparatively low rate a year ago, data released by the Ministry of Statistics and Programme Implementation on Monday indicated. Inflation, as measured by the consumer price index (CPI) was 5.59 per cent in the preceding month of December.

In its recently concluded monetary policy meet, Reserve Bank of India said inflation based on consumer price index (CPI) is expected to come well below its upper tolerance level, at 4.5 per cent, in the next fiscal year beginning April 2022. However, the hardening of crude oil prices presents a major upside risk to the inflation outlook. RBI retained its inflation projection at 5.3 per cent for the current financial year.

Unveiling the last monetary policy for the current fiscal year, RBI Governor Das said, core inflation remains elevated at tolerance-testing levels. Although the continuing pass through of tax cuts relating to petrol and diesel last November, would help to moderate the input cost pressures to some extent, he said.

“The increase in inflation in December was entirely due to an unfavourable base effect despite month-on-month decline in prices. Large buffer stocks of cereals and effective supply side measures augur well for food inflation.

Core inflation remains elevated but demand pull pressures are still muted. The renewed surge in international crude oil prices however needs to be closely monitored,” RBI Governor Das said in his statement.

“The transmission of input cost pressures to selling prices remains muted in view of the continuing slack in demand. Further as risks from Omicron (virus) wanes and supply-chain pressures moderate, there could be some softening of core inflation.

“On balance, the inflation projection for 2021-22 is retained at 5.3 per cent, with Q4, that is the current quarter at 5.7 per cent on account of unfavourable base effect that eased subsequently,” Das said.

Earlier today, Reserve Bank of India (RBI) Governor Shaktikanta Das defended the central bank’s latest inflation forecast, saying they are “robust”. While addressing the media on Monday, Das said the RBI stood by its forecast.

“At this point of time, our inflation projections are fairly, or I would say quite, robust and we stand by it. If there is something totally unforeseen (that happens), then of course, that is different,” Das said.