Retail inflation rises to 7.59% in January on higher food prices

Andrew Cummings
February 14, 2020

Wholesale inflation worsened to 3.1 per cent in January from 2.59 per cent in the previous month, government data showed on Friday.

The Consumer Price Index (CPI)-based inflation was 7.35 per cent in December 2019.

Vegetables remained costly, showing a 50% inflation rate, despite the recovery in onion prices. However, inflation rate for pulses moved up a tad to 16.71 per cent, from 15.44 per cent in December.

According to the data, manufacturing sector output declined by 1.2 per cent compared to growth of 2.9 per cent in the same month a year ago. It kept on growing since January 2019, when it was recorded at 1.97 per cent.

"The cumulative growth for the period April-December 2019 over the corresponding period of the previous year stands at 0.5 per cent".

Electricity generation also dipped 0.1 per cent as against a growth of 4.5 per cent in December 2018.

The inflation in primary articles, which have a weightage of 22.62 percent, came in at 10.01 percent for January, against 11.46 percent in December.

The inflation in non-food items for January came in at 7.05 percent against 7.72 percent a month ago.

Vegetables (including onion) and pulses still contribute in a big way to the rise in inflation, though the rate of inflation of the former did come come down slightly.

The inflation in fuel and power grew 3.42 percent in January from a contraction of 1.46 percent in December. This is the highest rate of inflation since May 2014, when it was 8.33 per cent.

"The internals of the food inflation are worrying, given a broad-based uptick across categories that tend to be sticky, such as proteins, and a narrower-than-expected reduction in inflation for vegetables".

Aditi Nayar, Principal Economist with ICRA, said with the further hardening of the headline CPI inflation, driven by a rise in the core print, coupled with only a mild decline in the food inflation, which persists in double-digits, the inflation for January 2020 is entirely unpleasant.

"The timing and magnitude of the next rate cut will depend on how quickly inflation appears to be reverting back towards 4 per cent".

Retail inflation has breached the RBI's medium-term target of 4 percent for the fourth straight month. The release of wholesale inflation data comes at a time when the economy is staring at the worst pace of annual expansion in more than 11 years, and the central bank has paused further monetary easing after reducing the key rates by 135 basis points (1.35 percentage point) last year.

Other reports by iNewsToday