India’s retail inflation again breaches RBI’s comfort zone
13 February, 2023 | Pragati Singh
Retail inflation in India again exceeded the Reserve Bank of India’s upper tolerance zone in January 2023, with the Consumer Price Index standing at 6.52 percent, according to official figure...
Retail inflation in India again exceeded the Reserve Bank of India’s upper tolerance zone in January 2023, with the Consumer Price Index standing at 6.52 percent, according to official figures released on Monday.
In rural and urban India, retail inflation was 6.85 percent and 6.00 percent, respectively. Cereals and goods, eggs, and spices, among other things, contributed to the increase in retail inflation in January. Retail inflation in India in December was 5.72 percent, compared to 5.88 percent in November and 6.77 percent in October, according to the Consumer Price Index.
Retail inflation in India has been over the RBI’s 6% objective for three consecutive quarters, and it will only return to that level in November 2022. To combat inflation, the RBI has raised the short-term lending rate by 250 basis points since May of last year, including the most recent 25 basis point rise. Raising the repo rate serves to calm the economy’s demand and hence manage inflation.
The RBI is regarded to have failed in managing price hikes under the flexible inflation targeting framework if CPI-based inflation falls outside the 2-6 percent range for three quarters in a row. Meanwhile, average retail inflation in India is expected to reach 5.3 percent in the fiscal year 2023-24, according to Reserve Bank of India governor Shaktikanta Das, who announced monetary policy outcomes on Wednesday.
He had stated that the estimate was based on the premise of a typical monsoon. Inflation is predicted to average 5.0 percent in Q1 2023-24, 5.4 percent in Q2, 5.4 percent in Q3, and 5.6 percent in Q4. Inflation is expected to be 6.5 percent for the fiscal year 2022-23, which ends in March, with an average of 5.7 percent in the January-March 2023 quarter.