India's CPI Inflation Rises To Four-Month High Of 5.69% In December

India's retail inflation rose in December, led by the base effect, though vegetable prices saw a sequential deceleration.

The Consumer Price Index-based inflation stood at 5.69% in December, as compared with 5.55% in November, according to data from the Ministry of Statistics and Programme Implementation released on Monday.

A panel of economists polled by Bloomberg had estimated a reading of 5.86% for December.

Food and beverage inflation rose to 8.7% in December, as compared with 8.02% in November. Core inflation, excluding volatile food and fuel, eased further to 3.9% in December, as compared with 4.12% in November, according to Bloomberg.

Consumer price inflation remains within the central bank's tolerance band of 4 (+/- 2)% for the fourth straight month.

CPI inflation for December 2023 has been largely in line with expectations, translating into an average of 5.4% for the third quarter of the fiscal as compared with the RBI forecast of 5.6%, said Suman Chowdhury, chief economist and head of research at Acuité Ratings.

"While the food inflation data on a sequential basis was underpinned by the seasonal contractionary behaviour seen in December, we reckon the perishables, specifically vegetable prices, easing was lower than the average seasonal behaviour."

Expectedly, food and beverage inflation remained high due to the continuing firmness in the prices of pulses and cereals. Mandi prices are showing a correction in perishables to continue, while select protein goods would need a watch, Madhavi Arora, lead economist at Emkay, said.

While the inflation trajectory is expected to remain benign in the last quarter of the fiscal, the average headline inflation for the year as a whole is unlikely to be less than 5.5%, as compared with 6.7% in FY23, Chowdhury said. Further, there are upside risks from the continuing El Nino phenomenon and its impact on the Rabi crop output.

• Cereal prices rose 9.93% in December, as against 10.27% in November.

• Inflation in meat and fish was at 1.15%, as compared with 2.15% in the previous month.

• Inflation in eggs was at 4.36%, up from 5.9% in the previous month.

• Inflation in milk and milk products was at 5.07%, as compared with 5.75%.

• Prices of oils and fats declined 14.96%, after a fall of 15.03% last month.

• Vegetable prices rose 27.64%, as compared with 17.7%.

• Pulses inflation was at 20.73%, as against 20.23%.

• Clothing and footwear inflation was at 3.61% versus 3.9%.

• Housing inflation was at 3.37%, as compared with 3.55%.

The Monetary Policy Committee is expected to continue to focus on their 4% inflation target and keep the repo rate and policy stance unchanged in the February policy, said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank.

"On the other hand, we expect the RBI to allow liquidity conditions to ease in the coming months, to let the operating target rate soften towards the repo rate before shifting stance—a move that is likely in Q1 FY25."