Retail Inflation Eases to 5.7% in December, Lowest in a Year; IIP At 7.1% in November

Retail Inflation in December: Retail inflation declined to a one-year low of 5.72 per cent in December 2022, mainly due to softening prices of food items. Also, it was well within the Reserve Bank of India’s (RBI) comfort range of 2 per cent-6 per cent for a second month, data released by the Ministry of Statistics & Programme Implementation (MoSPI) showed on Thursday.

The Consumer Price Index (CPI)-based inflation rate eased to 5.72 per cent in December. It was 5.88 per cent in November, and 6.77 per cent in October 2022.

After remaining above the Reserve Bank of India’s upper tolerance threshold of 6 per cent since January 2022, retail inflation declined in November to 5.88 per cent and further in December to 5.72 per cent — its lowest level in one year.

The marginal dip in inflation was driven by lower food prices, especially vegetables. It may be noted that food inflation for December came in at 4.1 per cent, compared to 4,.67 per cent in November. The inflation rate for vegetables saw the biggest contraction at 15.08 per cent. Inflation rate for fuel and light, however, increased mildly to 10.97 per cent against 10.62 per cent in November.

The latest inflation data will provide comfort to the RBI, which hiked interest rates by 225 bps in five tranches since May to contain inflation. Economists had earlier indicated that inflation in December would remain steady as moderation in food price rises was offset by higher core inflation.

Despite easing inflation, the RBI is likely to maintain its hawkish stance in the near term as it continues to keep a close watch on inflation.

Meanwhile, the Index of Industrial Production (IIP) grew 7.1 per cent year-on-year in November, compared to a contraction of 4 per cent in October, according to the government data.

Aditi Nayar, chief economist at ICRA, said, “While we had expected the IIP performance to rebound, the print was much stronger than expected at 7.1% in November 2022 as compared to the woeful contraction of 4.2% in October 2022, with a reversal of the base effect related to an early festive season. However, the YoY growth of most available high frequency indicators has moderated in December 2022 relative to November 2022, partly reflecting an unfavourable base related to the post-festive season rebound seen in December 2021. In line with this, we expect the overall IIP growth to moderate to low single digits in December 2022.”

Read all the Latest Business News here