Costly food fuels inflation past RBI’s comfort zone

New Delhi: With a spike in prices of food items, India’s headline retail inflation rate breached the central bank’s comfort zone of 2-6 per cent target and jump-ed to a three-month high of 6.52 per cent in January from December’s one-year low of 5.72 per cent,  showed the data released by the ministry of statistics and programme implementation on Monday.

The retail inflation, measured by the annual change in the consumer price index or CPI, tracks the change in retail prices of goods and services which households purchase for their daily consumption. At 6.52 per cent, the latest CPI inflation print is significantly above the consensus estimate. As for the medium-term target of four per cent, the CPI inflation has now been above it for 40 months in a row.

In the recent monetary policy announcement, Re-serve Bank of India (RBI) Governor Shaktikanta Das had said that in FY23, the inflation is expected to grow at 6.5 per cent and in FY24, it is expected to fall to 5.3 per cent. However, he noted that the inflation is still ‘sticky’.

As per the data, the inflation rate stood at 5.72 per cent in December and 6.01 per cent in January 2022. The rise in inflation in the month of January was mainly led by the food items, whose inflation shot up to 5.94 per cent from 4.19 percent in December. “The inflation rate for the food basket was at 5.94 per cent in January, up from 4.19 per cent in December. The previous high was 6.77 per cent in October,” the data showed.

With the rise of food inflation in January due to an unfavourable base effect, the upward trend also indicated a rise in price pressure and the surge was far more than expected. Within food, the data showed, the greatest increase in prices on a month-on-month basis was seen in cereals, eggs, and spices.