Retail inflation eases to 2 yr-low

Food items, carrying the highest weight in the CPI basket, see inflation fall but protein-rich items get dearer

Consumer Price Index-based inflation, a widely tracked rate after a Reserve Bank of India (RBI) panel recommended targeting it, has declined for a second month in a row. The rate of price rise fell to a two-year low of 8.79 per cent in January from 9.87 per cent in the previous month. The inflation had reached a record 11.16 per cent in November and was blamed for the Congress’ rout in the recent assembly elections.

Inflation in both urban’s and rural parts on a downswing. While it fell to 8.09 per cent in January from 9.11 per cent in December in urban India, rural areas saw the rate of rise coming down to 9.43 per cent from 10.49 per cent.

Food items, carrying the highest weight of over 45 per cent, saw inflation easing to 9.90 per cent from 12.16 per cent in December.

However, fruit prices rose 15.6 per cent as compared to 14.64 per cent in December.

Protein-rich items such as eggs, meat and fish became dearer by 11.69 per cent in January. The rate of inflation in this segment was slightly higher at 12.64 per cent in December.

Pulses were costlier by 2.59 per cent, cereals by 11.42 per cent and milk products by 9.82 per cent in January. Clothing, bedding and footwear saw prices rising to 9.18 per cent against 9.25 per cent in December.

Similarly prices of fuels increased 6.54 per cent  against 6.98 per cent in the previous month.

The Wholesale Price Index-based inflation was much lower at 6.16 per cent in December. The data for January will come on Friday.

However, RBI has indicated shifting its stance of monetary policy towards targeting retail inflation. The central bank had said it might exceed eight per cent by March-end and efforts would continue to bring it down.

A committee headed by Reserve Bank of India (RBI)’s Deputy Governor Urjit Patel had, last week, recommended the central bank aim to bring down retail inflation to eight per cent by January 2015 and to six per cent by January 2016.

Though the overall retail rate of  price rise decreased in January, core inflation (relating to non-food, non-fuel items) picked up slightly for a third straight month, to 8.11 per cent from  8.09 per cent  in December. Core inflation is expected to be a key determinant of RBI’s monetary stance generally.

Even as there are demands for a rate cut by industry and  business chambers as industrial production contracted for a third straight month, economists did not think RBI will do so in its April  policy. “We expect RBI to hold  monetary policy rates in its  forthcoming review in April,” said Bhupali Gursale, economist with Angel Broking.