Continuing rise in food and fuel prices pushed India’s annual retail inflation rate over the five per cent-mark in December, official data showed on Friday, putting paid to hopes of an interest rate cut by the RBI in the near future.
According to the data furnished by the Ministry of Statistics and Programme Implementation, December’s consumer price index (CPI) inflation rose to 5.21 percent from 4.88 percent in November.
On a year-on-year (YoY) basis, the CPI inflation last month was higher than the 3.41 percent recorded in December 2016.
The Consumer food price index (CFPI) in December stood at 4.96 percent compared to the 4.42 percent of November 2017.
The annual CPI in rural areas in December ruled higher at 5.27 percent, while in urban India it rose by 5.09 percent.
Retail inflation on a YoY basis edged higher due to a rise in the prices of food items like vegetables, milk-based products, eggs, meat, and fish.
The data showed that vegetables in December became costly by a whopping 29.13 percent, while prices of milk-based products rose by 4.37 percent.
Other notable categories such as cereals became dearer by 2.57 percent and meat and fish recorded a rise of 4.22 percent.
The sub-category of food and beverages during the month under consideration recorded a rise of 4.85 percent over the same period last year.
Among non-food categories, the “fuel and light” segment’s inflation rate accelerated to 7.9 percent in October.
Earlier this month, Finance Minister had told Parliament that the inflation had increased owing to a seasonal rise in vegetable prices and the higher house rent allowances disbursed to government employees under the 7th Pay Commission recommendations.
Inflationary risks forced the Reserve Bank of India (RBI) to hold its key lending rate unchanged for the third time in a succession at 6 percent in its penultimate bi-monthly monetary policy review of the fiscal last month.
Announcing the decision of the monetary policy committee (MPC), the RBI said inflation is expected to range around 4.3-4.7 percent in the second half of the fiscal, including the impact of the increase in house rent allowance.
The central bank said, “two of the key factors determining the cost of living conditions and inflation expectations — food and fuel inflation — edged up in November”.
“The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index inflation of 4 percent within a band of +/- 2 percent, while supporting growth,” an RBI statement said.