India’s retail inflation in January eased to 5.10 percent annually from December’s four-month high of 5.69 percent.
Official data released by the Ministry of Statistics and Programme Implementation on Monday evening revealed that rural and urban inflation rates were 5.34 percent and 4.92 percent, respectively. This marks a decrease from the figures of 5.93 percent and 5.46 percent reported in the same month last year.
While retail inflation in India remains within the Reserve Bank of India’s (RBI) comfort range of 2-6 percent, it exceeds the preferred scenario of 4 percent.
The recent decline in month-on-month retail inflation follows the Reserve Bank of India’s decision on February 8 to keep the repo rate unchanged for the sixth consecutive time.
Barring the recent pauses, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
Following are some of the excerpts of views from analysts and experts on the January retail inflation numbers:
Dharmakirti Joshi, Chief Economist, CRISIL Ltd:
Fuel prices continued to fall on-year, but the pace of the decline slowed. Disruption along the critical Red Sea route is a risk for fuel, commodity, and core inflation. Against this backdrop, we expect that the RBI will hold interest rates steady till at least the June policy review.
Rajani Sinha, Chief Economist, CareEdge Ratings:
Looking ahead, a favourable base effect is expected to persist until July 2024, helping absorb potential upward risks to price pressures to a certain extent. Additionally, the arrival of the early harvest in the market over the next few months is anticipated to alleviate price pressures further.
Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI:
While headline retail inflation cooled in January, it has now spent 52 consecutive months above the RBI medium-term target of 4 per cent. On the positive side, inflation has now been within the tolerance range of 2-6 per cent for the fifth month in a row.
Raghvendra Nath, MD, Ladderup Wealth Management:
Should this trajectory persist, the Reserve Bank of India (RBI) may find increased confidence in implementing rate cuts, particularly in alignment with similar actions by the Federal Reserve.
Nikhil Gupta, Chief Economist, Motilal Oswal Financial Services:
Overall, we see inflation hovering between 5-5.5 per cent, led by food in 1HCY24, before easing in 3Q towards 4 per cent and rising back to 4.5-5 per cent in the next two quarters. Thus, we don’t see any monetary policy action based on inflation this year. It will be determined by the domestic growth trajectory (if it turns out much weaker than the general forecast of 6.5-7 per cent) or if the US FED makes a sharp move.
Madhavi Arora, Lead Economist, Emkay Global Financial Services:
We maintain that the RBI will not precede the Fed in any policy reversal in CY24 and policy management will have to stay vigilant amid the fluidity of global narratives.
