<p>The common man continued to reel under the burden of rising prices as the retail inflation rate rose sharply in December to 7.35% backed by a whopping 60.5% rise in vegetable prices.</p>.<p>This will prompt the government to enhance supply side measures and the RBI to pause the interest rate cut for longer than expected.</p>.<p>This is the highest retail inflation print since 2014. Retail inflation was at 5.54% in November and 2.19% in December 2018. The fine print of the data released by the government showed onion and garlic sent inflation skyrocketing. While onion prices rose 328% in December compared to 146% in the previous month, inflation in garlic rose to 153%.</p>.<p>Onion and garlic are two important ingredients in the Indian kitchen.</p>.<p>At 7.35%, the consumer price index breached the upper band of the Reserve Bank of India’s inflation target of 6%. This may prompt the RBI to maintain status quo in its February 6 monetary policy.</p>.<p>Retail food inflation rose 14.1% in December from 10.01% in the previous month.</p>.<p>Rising food inflation is unpleasant news for a poor country like India, where food’s share in the retail inflation basket is over 50%. Rest of the items weigh less than 50% in the CPI basket.</p>.<p>Rise in vegetable prices in the winter months may pose bigger problems to policy makers as it is during this season that vegetable rates are usually under control.</p>.<p>It is during summer that vegetable prices spike in India because much of them perish due to weak transportation.</p>.<p>December core inflation, however, came as a little respite as it came down by 20 basis points to 3.7% from 3.9% in November.</p>.<p>Core inflation, which excludes the volatile food and fuel prices, is considered to be a better measure of inflation.</p>.<p>“CPI at 7.35% is led predominantly by food, fuel and miscellaneous. Given this number, CPI is expected to firm up further in the next few months. For headline inflation to converge to 4% over the next fiscal year, food inflation will need to reverse dramatically. We maintain our no rate cut until October-December quarter 2020,” said Shubhada Rao, chief economist at Yes Bank.</p>.<p>Most of the analysts including from ICRA an Emkay Capital, maintained that RBI will wait and watch for inflation to come down before moving on to cut rates further.</p>.<p>RBI Governor Shaktikanta Das’ had, a couple of days ago, said that price stability is the central bank’s main concern.</p>.<p>Meanwhile, a six-year high inflation print coming just two weeks before the Budget may also force Finance Minister Nirmala Sitharaman to have a re-think on stimulus measures that people may be waiting for.</p>.<p>Though vegetable and food price rise is considered to be transient, the problem occurs when a pronged spike in prices of these items gets transmitted into other areas.</p>
<p>The common man continued to reel under the burden of rising prices as the retail inflation rate rose sharply in December to 7.35% backed by a whopping 60.5% rise in vegetable prices.</p>.<p>This will prompt the government to enhance supply side measures and the RBI to pause the interest rate cut for longer than expected.</p>.<p>This is the highest retail inflation print since 2014. Retail inflation was at 5.54% in November and 2.19% in December 2018. The fine print of the data released by the government showed onion and garlic sent inflation skyrocketing. While onion prices rose 328% in December compared to 146% in the previous month, inflation in garlic rose to 153%.</p>.<p>Onion and garlic are two important ingredients in the Indian kitchen.</p>.<p>At 7.35%, the consumer price index breached the upper band of the Reserve Bank of India’s inflation target of 6%. This may prompt the RBI to maintain status quo in its February 6 monetary policy.</p>.<p>Retail food inflation rose 14.1% in December from 10.01% in the previous month.</p>.<p>Rising food inflation is unpleasant news for a poor country like India, where food’s share in the retail inflation basket is over 50%. Rest of the items weigh less than 50% in the CPI basket.</p>.<p>Rise in vegetable prices in the winter months may pose bigger problems to policy makers as it is during this season that vegetable rates are usually under control.</p>.<p>It is during summer that vegetable prices spike in India because much of them perish due to weak transportation.</p>.<p>December core inflation, however, came as a little respite as it came down by 20 basis points to 3.7% from 3.9% in November.</p>.<p>Core inflation, which excludes the volatile food and fuel prices, is considered to be a better measure of inflation.</p>.<p>“CPI at 7.35% is led predominantly by food, fuel and miscellaneous. Given this number, CPI is expected to firm up further in the next few months. For headline inflation to converge to 4% over the next fiscal year, food inflation will need to reverse dramatically. We maintain our no rate cut until October-December quarter 2020,” said Shubhada Rao, chief economist at Yes Bank.</p>.<p>Most of the analysts including from ICRA an Emkay Capital, maintained that RBI will wait and watch for inflation to come down before moving on to cut rates further.</p>.<p>RBI Governor Shaktikanta Das’ had, a couple of days ago, said that price stability is the central bank’s main concern.</p>.<p>Meanwhile, a six-year high inflation print coming just two weeks before the Budget may also force Finance Minister Nirmala Sitharaman to have a re-think on stimulus measures that people may be waiting for.</p>.<p>Though vegetable and food price rise is considered to be transient, the problem occurs when a pronged spike in prices of these items gets transmitted into other areas.</p>
