Retail inflation dips to 19-month low in Jan

Fall in food prices, easing fuel cost pull down CPI

Retail inflation fell to a 19month low of 2.05 per cent in January due to fall in prices of food articles, mainly fruit and vegetables, coupled with easing of fuel cost, government data showed on Tuesday.

The Consumer Price Index (CPI)-based retail inflation was revised downwards for the preceding month December to 2.11 per cent from the earlier estimate of 2.19 per cent, showed data from the Central Statistics Office (CSO).

Fall in prices strengthen views that the RBI could again cut the key interest rate at its next policy review in April.

In the year-ago month, January 2018, the retail inflation was at 5.07 per cent.

Fruits, vegetables and eggs continued to witness deflationary trend during January this year, with their prices declining 4.18 per cent, 13.32 per cent and 2.44 per cent, respectively, according to the CSO data released by the Ministry of Statistics and Programme Implementation (MoSPI).

The rate of price rise in the 'fuel and light' category was 2.20 per cent in January 2019, compared with 4.54 per cent in December 2018.

The overall food inflation during the latest month remained in the negative zone at (-)2.17 per cent. It was ()2.51 per cent in December 2018.

"At 2.05 per cent, CPI for January is at 19-month low. Extended winter remains supportive of decelerating food prices. The fuel component, too, has surprised on the downside," said Shubhada Rao, chief economist, Yes Bank.

The previous low than the latest print of 2.05 per cent was back in June 2017, when retail inflation was at 1.46 per cent.

This, along with core inflation at 5.36 per cent, presents a scenario of CPI year-onyear growth between 2 per cent and 3 per cent in the next 5 months. This raises the probability of rate cuts in April and beyond, she said.

ICICI Bank Head of Global Markets Group B Pasanna said: "India's industrial production data for December was in line with expectations and confirms our belief that the November print was more an aberration."

The recovery in growth in consumer goods, especially non-durables, is encouraging.

"Our expectations for the next few months are also benign on headline CPI and, hence, we believe that there is a room for further accommodation in the next policy meeting," he said.