iGauravMahajan

India's retail inflation eases to 5.7% in December 2022, lowest of the year

India's retail inflation eases to 5.7% in December 2022

India’s retail inflation, as measured by the consumer price index (CPI), eased to 5.72 per cent in December on an annual basis as against 5.88 per cent in November, 2022. The number has remained within RBI’s tolerance band of 2-6 per cent for the second consecutive month. This is a 12-month low, providing the much-needed comfort to the government.

The decline can be attributed to easing food prices which account for nearly 40 per cent of India’s CPI (Consumer Price Index) basket. The food inflation rate fell to 4.19 per cent in December, from 4.67 per cent in November, driven by vegetables (minus 15.08 per cent), fruit (2 per cent), and prepared meals (7.76 per cent). However, the inflation rate for meat and fish (5.13 per cent), eggs (6.91 per cent), cereals (13.79 per cent), milk products (8.51 per cent), pulses (3.89 per cent), and spices (20.35 per cent) accelerated during the month. A fall in food inflation can be called good news for the households since a major chunk of an average Indian household’s budget is dedicated towards this basket.

Retail inflation had been above the 6 per cent mark for three consecutive quarters, forcing the central bank to go on a rate-hike spree. To rein in inflation, the Reserve Bank of India (RBI) has raised interest rates by 225 basis points, including a 35 basis points hike last month. The sharper-than-expected drop in headline inflation, despite the base effect turning adverse, would come as a relief to the RBI.

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