Retail inflation likely eased to 5-month low of 4.5% in January: Mint poll
Subscribe to enjoy similar stories. India’s retail inflation likely eased to a five-month low of 4.5% in January, according to a Mint poll of 22 economists. This will be significantly below the 5.2% print recorded in December, mainly due to the continuing softness in the price of food, particularly vegetables.
While all economists polled by Mint expected inflation to moderate in January, one projected only a minor easing to 5.1%. Barring this, the projections for inflation were in the range of 4.2-4.7%. The official data is scheduled to be released on 12 February.
“Vegetable prices eased notably in January, thanks to fresh crop arrivals. Since the usual winter correction in food prices has been a bit delayed this time, we expect food prices to continue to fall further, easing the constraint on the Reserve Bank of India," said Dhiraj Nim, economist at ANZ Research. Food inflation had risen sharply in September and October, pushing headline inflation above the RBI’s upper tolerance limit of 6% on the back of high vegetable prices.
However, with seasonal moderation in vegetable prices taking effect, inflation began easing from November onwards. However, inflation for food, which makes upnearly 40%of the overall inflation basket, remained above the headline inflation by 337 basis points in November-December. 100 basis points are equivalent to one percentage point.
Nevertheless, easing headline inflation will offer relief to the Reserve Bank of India (RBI), which has begun easing monetary policy. Last week, in a significant policy shift, the RBI cut the policy repo rate by 25 basis points to 6.25% under newly appointed governor Sanjay Malhotra. “Going ahead, food inflation pressures, absent any supply side shock, should see a
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