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India's retail inflation slightly eases in January

14 February 2018

India's retail inflation marginally slowed to 5.07 percent in January, as prices of fruits, vegetables and oil prices slightly eased, data released by the Central Statistics Office showed.

In November, the index of industrial production (IIP) grew 8.8% and consumer price index (CPI) based inflation rose by 5.21%.

The cumulative growth for the period April-December 2017 over the corresponding period of the previous year stands at 3.7%.

Inflation may increase in the coming months due to oil price hike and food inflation not coming down. A Reuters poll of 26 economists had projected it at 5.14 per cent.

The hardening of inflation has forced the RBI to keep the lending rates unchanged.

"I do not expect a rate hike for the next five to six months", said Raghvendra Nath, managing director of Ladderup Wealth Management.

Tushar Arora, Senior Economist, HDFC Bank said, "Retail inflation is likely to hover around the 5 per cent mark in the January-March quarter". Food prices have softened, reflecting eased vegetable costs following stepped-up arrivals in markets of fresh crops.

Meanwhile, the general index for the month of December 2017 stood at 130.3, which is 7.1 percent higher as compared to the level in the month of December 2016. The corresponding provisional inflation rate for rural area was 5.21% and urban area 4.93% in January 2018 as against 5.27% and 5.09% in December 2017. The cumulative growth in these three sectors during April-December 2017 over the corresponding period of 2016 was 2.8, 3.8 and 5.1 percent respectively.

CPI is the main price gauge that the Reserve Bank of India (RBI) tracks, crucial for implementation of monetary policy.

By opting to hold interest rates despite its concerns about the growing threat of inflation, the central bank has signalled it will do its bit to protect the nascent recovery underway in the economy.

India's retail inflation slightly eases in January