India's retail inflation moderates to 5.22% in December
What's the story
India's retail inflation has witnessed a decline, hitting a four-month low in December.
The fall was mainly led by a slower increase in food prices, preliminary government data released on Monday showed.
The All India Consumer Price Index (CPI)-based annual retail inflation stood at 5.22% in December, down from 5.48% in November according to the Ministry of Statistics & Programme Implementation (MoSPI) data.
Inflation target
Retail inflation aligns with RBI's medium-term target
The latest retail inflation number is in line with the Reserve Bank of India (RBI)'s medium-term target band of 2-6%.
Food inflation, a perennial problem for the nation, increased by 8.39% year-on-year (YoY) in December against a rise of 9.04% in November and 9.53% in the corresponding period of 2023.
Price volatility
High food prices persist due to uneven monsoon
High food prices have continued for more than a year, staying above 7% from November 2023 to June 2024. This is mainly because of last year's uneven and below-average monsoon rains.
Although overall food inflation slowed down in December, prices of meat and fish, eggs, and fruits rose at a faster pace in the month compared to November.
Changes
Inflation for food and beverages, clothing prices in December
In December, the inflation rate for food and beverages increased by 7.69%, as opposed to 8.20% in November.
Notably, the price of clothing and footwear witnessed a decline during this period.
Of the 22 states, 13 reported inflation rates higher than 5% in December, marking the fourth consecutive month of over 5% inflation.
States that reported lower inflation than the national average included Andhra Pradesh, Delhi, Gujarat, Himachal Pradesh, Jharkhand, Maharashtra Rajasthan Telangana West Bengal.
Economic forecast
RBI maintains benchmark repo rate, forecasts GDP growth
The RBI kept the benchmark repo rate unchanged at 6.5% during its bi-monthly Monetary Policy Committee (MPC) meeting in December.
The decision suggests that interest rate cuts may not be around the corner.
The MPC also pledged to keep its neutral monetary policy stance, focusing on aligning inflation with the target range of 2%-6% while supporting economic growth.