Retail Inflation Eases in December

In a recent development, retail inflation in India has dipped to a four-month low of 5.2% in December, primarily due to a softening in food prices, especially vegetables. Despite this decline, inflation remains above the 5% mark, posing challenges for the Reserve Bank of India in its interest rate decisions.

Detailed Inflation Data

The National Statistics Office (NSO) released data indicating a marginal slowdown in retail inflation from 5.5% in November to 5.2% in December. The food price index also saw a moderation, dropping to 8.4% from over 9% in the previous month. Rural areas experienced higher inflation at 5.8% compared to urban areas at 4.6%.

Key Contributors to Inflation

Vegetable inflation significantly decreased to 26.6%, yet edible oil prices hit a 33-month high, increasing by 14.6%. The NSO highlighted that peas, potatoes, garlic, coconut oil, and cauliflower were among the top items with the highest year-on-year inflation rates. Conversely, items like jeera, ginger, dry chillies, and LPG recorded the lowest inflation rates.

Expert Analysis

Dipti Deshpande, a principal economist at Crisil, noted that despite the softening, food inflation remains elevated with an average of 8.4% this fiscal year, higher than the 7.5% average of the previous fiscal year. This rigidity in food prices continues to be a concern for policymakers.