<p>India’s retail inflation declined to a five-month low of 4.31% in January, moving closer to the Reserve Bank of India’s medium-term target of 4%, helped by cooling in food prices, according to official data released on Wednesday.</p><p>Food inflation, which has been the key reason for the elevated inflation so far this financial year, eased to 6.02% in January from 8.4% recorded in December. This is the third-straight month of decline in food inflation, which makes up around half of the Consumer Price Index (CPI) basket.</p><p>A sharp drop was registered in vegetable inflation, dropping from 26.6% in December to 11.3% in January. Foodgrains inflation eased to 5.5% from 5.9%, data released by the National Statistical Office showed.</p><p>CPI inflation has declined sharply after rising to a 14-month high of 6.21% in October. It stood at 5.48% in November and eased to 5.22% in December.</p><p>The cooling in inflation boosts the chance of another rate cut by the RBI in April. Last week, the central bank lowered the policy repo rate by 25 basis points to 6.25%, the first interest rate cut in nearly five years.</p>.World food price index eases in December, pushed lower by sugar.<p>While food inflation is expected to ease further due to normal monsoon and softer global food prices, there is risk of imported inflation due to depreciation of the rupee. “The recent depreciation in the rupee has increased the risk of imported inflation and will have to be monitored. India imports items such as crude and edible oil, which can impact the overall inflation outlook,” said Dharmakirti Joshi, Chief Economist, Crisil.</p><p>Core inflation inched marginally higher to 3.7%. Inflation in edible oil jumped to a 33-month high of 15.6% in January due to high global prices and rise in import duties.</p><p>Since around 60% of edible oil is imported, weakening currency also adversely impacts its price. </p><p>“We expect the inflation trajectory to remain benign in the months ahead to provide room for another 25 bps of rate cut by the Monetary Policy Committee. However, the pace of rupee depreciation will need to be closely watched for spill overs on domestic inflation,” said Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.</p>
<p>India’s retail inflation declined to a five-month low of 4.31% in January, moving closer to the Reserve Bank of India’s medium-term target of 4%, helped by cooling in food prices, according to official data released on Wednesday.</p><p>Food inflation, which has been the key reason for the elevated inflation so far this financial year, eased to 6.02% in January from 8.4% recorded in December. This is the third-straight month of decline in food inflation, which makes up around half of the Consumer Price Index (CPI) basket.</p><p>A sharp drop was registered in vegetable inflation, dropping from 26.6% in December to 11.3% in January. Foodgrains inflation eased to 5.5% from 5.9%, data released by the National Statistical Office showed.</p><p>CPI inflation has declined sharply after rising to a 14-month high of 6.21% in October. It stood at 5.48% in November and eased to 5.22% in December.</p><p>The cooling in inflation boosts the chance of another rate cut by the RBI in April. Last week, the central bank lowered the policy repo rate by 25 basis points to 6.25%, the first interest rate cut in nearly five years.</p>.World food price index eases in December, pushed lower by sugar.<p>While food inflation is expected to ease further due to normal monsoon and softer global food prices, there is risk of imported inflation due to depreciation of the rupee. “The recent depreciation in the rupee has increased the risk of imported inflation and will have to be monitored. India imports items such as crude and edible oil, which can impact the overall inflation outlook,” said Dharmakirti Joshi, Chief Economist, Crisil.</p><p>Core inflation inched marginally higher to 3.7%. Inflation in edible oil jumped to a 33-month high of 15.6% in January due to high global prices and rise in import duties.</p><p>Since around 60% of edible oil is imported, weakening currency also adversely impacts its price. </p><p>“We expect the inflation trajectory to remain benign in the months ahead to provide room for another 25 bps of rate cut by the Monetary Policy Committee. However, the pace of rupee depreciation will need to be closely watched for spill overs on domestic inflation,” said Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.</p>