Experts on further easing retail inflation

According to the most recent figures from the Ministry of Statistics, retail inflation in India was 5.72 percent in December.

The most recent numbers, announced on Thursday, revealed a slight reduction in retail inflation and continued moderation in comparison to the previous month. The retail inflation rate in India was 5.88 percent in November, down from 6.77 percent in October, according to the Consumer Price Index. Retail inflation in India had maintained above 6% for more than three quarters until October, which was outside the RBI’s comfort zone.

The following are some analysts’ and experts’ reactions to the recent retail inflation data:

Rajani Sinha, Chief Economist at CareEdge:

Retail inflation fell more than predicted in December, pushing the headline figure below the RBI’s upper tolerance for the second month in a row. The softening is mostly related to a drop in vegetable prices, which helped balance increases in the expenses of other food basket items such as cereals, milk, and meat.

However, there is worry that core CPI inflation continues stubbornly over 6%, with signs of strong inflation in the services sector. In terms of policy, we expect that the RBI’s decision at the February monetary policy meeting will be a close call, with core inflation continuing sticky.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services:

Retail inflation in December was 5.72 percent, confirming a downward trend that began in November. This will allow the RBI to take its time raising interest rates.

Vijay Kalantri, Chairman of the Mumbai-based MVIRDC World Trade Center:

The second consecutive month of retail inflation drop is in accordance with the RBI’s forecast, and it is mostly driven by moderation in food price inflation, notably contraction in vegetable price inflation.

Given the steady reduction in retail inflation, we anticipate the RBI to maintain policy rates at its next policy meeting in February 2023.

Market Intelligence and Analytics from CRISIL:

The reduction in inflation was mostly caused by a dramatic drop in vegetable costs due to the arrival of new crops in the winter. Food (cereals, milk, pulses) and core inflation remain pressure issues.

Retail inflation fell short of predictions due to a dramatic drop in vegetable costs, although most other main categories showed year-on-year price increases.