Driven by higher prices of food, vegetable and other consumer items and, an unfavourable base of last year, India's retail inflation in January rose to seven-month high of 6.01%, marginally breaching the Reserve Bank of India (RBI) tolerance band of 6%.
Retail inflation, also known as consumer price inflation, was at 5.56% last month.
The food and beverages inflation rose to 5.58% compared to 4.5% in December. Vegetable prices rose by 5.19% after falling by 3% in the previous month. Clothing and footwear inflation also rose suggesting producers raised prices despite the pandemic making a dent in demand.
"In a sense, the numbers came in higher than what we were expecting. Food inflation has started going up. Given the global crude prices, fuel inflation is also expected to build up. On top of that core inflation hovering around 6% for the last 12 months is a matter of concern. Overall the inflationary dynamics are looking precarious and from this perspective, RBI's outlook for FY23 looks dovish," said Sujan Hajra, Chief Economist at Anand Rathi Securities.
Hours before the release of inflation data, Reserve Bank of India Governor Shaktikanta Das said though CPI inflation would be close to the RBI's tolerance band, it should not create any panic as the central bank is committed to its inflation mandate.
He said, "as far as India is concerned, if you look at the momentum of inflation right from last October onward, it is on a downward slope. It's primarily the statistical reasons, the base effect, which has resulted in higher inflation especially in Q3".
"As feared, an unfavorable base hardened the YoY CPI inflation to a seven month high, printing marginally above the 6.0% upper threshold of the MPC's medium term forecast range for the first time since June 2021, and exceeding our forecast of 5.9%. Interestingly, while the urban inflation remained unchanged at 5.9%, the rural CPI inflation surged to 6.1% in January 2022 from 5.4% in the previous month, reversing the gap between the two metrics," said Aditi Nayar, Chief Economist at ICRA.
The wholesale price inflation too remained in double digits for the 10th consecutive month in January, the official data showed. It was close to 13%.
"The high rate of inflation in January 2022 is primarily due to rise in prices of mineral oils, crude petroleum and natural gas, basic metals, chemicals and chemical products, food articles etc., as compared to the corresponding month of the previous year," the Commerce and Industry Ministry said in a statement.
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