Task cut out for FM, RBI after December IIP print
Double digits is bad, but vegetable inflation is the shocker

Economy Feb 12, 2013

CPI stays in double digits, rises to 10.79 percent in Jan

Rising for the fourth consecutive month, retail inflation remained in double digits at 10.79 percent in January, driven by higher prices of vegetables, edible oil, cereals and protein-based items against at 10.56 percent in
December, 9.90 percent in November and 9.75 percent in October, 2012.

India's retail inflation is the highest among the BRICS group of emerging economies - Brazil, Russia, China, and South Africa.

Reuters

Reuters

Also, January wholesale price index data, which the Reserve Bank of India gives more weight to in setting policy, is due on Friday. The index for December rose 7.18 percent, the slowest in three years and much lower than RBI's comfort level of five to six percent.

RBI governor D. Subbarao said on Monday that although growth had moderated significantly, wholesale price inflation still remained high at 7.2% in December.

"Despite incremental efforts we are still staring at a weak growth print," said Jyotinder Kaur, economist at HDFC Bank.

"We expect a rate cut in March as growth is consistently surprising on the downside while the pace of CPI (consumer price inflation) has stabilised."

The vegetables basket in January recorded the highest inflation of 26.11 percent among all the constituents that make the Consumer Price Index (CPI), according to data released today.

Vegetables were followed by the oil and fats segment at 14.98 percent. Meat, fish and egg became 13.73 percent more expensive during the month. While, cereals and pulses became dearer by 14.90 percent and 12.76 percent respectively on an annual basis, sugar turned more expensive by 12.95 per cent. Clothing and footwear witnessed 11 percent increase in prices during the month.

In urban areas, retail inflation rose to 10.73 percent in January from 10.42 per cent in the previous month. The CPI for rural population increased to 10.88 per cent during the month from 10.74 percent in December.

The Reserve Bank of India (RBI) in its monetary policy last month had slashed its key interest rates by 0.25 percent and released Rs 18,000 crore additional liquidity into the system to perk up growth through reduced cost of borrowing.The RBI has forecast the March end WPI inflation at 6.8 percent. Meanwhile, industrial output growth rate contracted by 0.6 percent in December, 2012, compared to a growth of 2.7 percent in same month a year ago.

Agencies

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