SME Times News Bureau | 13 Jan, 2020
Rise in food prices pushed India's retail inflation in
December to a 65-month high at 7.35 per cent from 5.54 per cent in November, official
data showed on Monday.
Economy watchers said the spike in December retail inflation came on the back
of expensive food prices, as seasonal factors made vegetables and pulses
As per the data furnished by the National Statistical Office, on a year-on-year
(YoY) basis, the Consumer Price Index (CPI) for December was higher than the
corresponding period of last year when retail inflation stood at 2.11 per cent.
Similarly, the Consumer Food Price Index (CFPI) inflated to 14.12 per cent
during the month under review from an expansion of 10.01 per cent in November
2019 and (-)2.65 per cent rise reported for the corresponding period of last
In addition, the data assumes significance as the Reserve Bank of India in its
last monetary policy review maintained the key lending rates on account of
rising retail inflation.
The central bank is expected to keep the rates intact during the last monetary
policy review for 2019-20 to be held in February.
In terms of CPI YoY inflation rate, vegetables and pulses' prices jumped by
60.50 per cent and 15.44 per cent, respectively in December 2019.
Furthermore, meat and fish prices rose 9.57 per cent, eggs became dearer by
8.79 per cent and the overall price of food and beverages category was up 12.16
In addition, the fuel and light category under CPI rose 0.70 per cent.
Last month, RBI in its monetary policy review statement had predicted the
CPI-based inflation to rise in the coming quarters.
"Going forward, the inflation outlook is likely to be influenced by
several factors. First, the upsurge in prices of vegetables is likely to
continue in the immediate months; however, a pick-up in arrivals from the late
kharif season along with measures taken by the government to augment supply
through imports should help soften vegetables prices by early February
2020," the Fifth Bi-monthly Monetary Policy Statement, 2019-20 said.
"Second, incipient price pressures seen in other food items such as milk,
pulses, and sugar are likely to be sustained, with implications for the
trajectory of food inflation. Third, both the 3-month and 1-year ahead
inflation expectations of households polled by the Reserve Bank have risen and
these latent sentiment upsides are being reflected in other surveys as well."
The data also indicated that retail inflation has not only breached the
medium-term target of the RBI to contain CPI inflation within 4 per cent but
also the upper band of 6 per cent.
"While vegetable prices led the spike in food inflation, prices of other
food items, especially proteins, hardened appreciably as well," ICRA
Principal Economist Aditi Nayar said.
"In particular, prices of pulses may remain elevated in the coming months,
despite the favourable outlook for the rabi crop. Stickiness in prices of protein
items may provide a floor to food inflation going forward, even once vegetable
prices correct to seasonally appropriate levels."
Nevertheless, business body, PHD Chamber said that spike in inflation will
"We don't expect that the rise in inflation rate is sustainable; the
average inflation should remain at around 5.5 per cent for the current
financial year," D.K. Aggarwal, President, PHD Chamber of Commerce and
Industry said in a statement.
"Going ahead, we look forward to the continuation of softer stance of
monetary policy by RBI to spur investments and consumption demand in the coming
According to M. Govinda Rao, Chief Economic Advisor, Brickwork Ratings:
"CPI inflation accelerated to 7.35 per cent in December 2019 and this is
the highest in 65 months."
"With the CPI inflation breaching the RBI MPC's target of 6 per cent, for
the first time in the last 41 months, there is little scope for MPC to continue
with monetary policy easing at least in the short term."