Published: Tue, February 14, 2017
Markets | By Terence Owen

India's January retail inflation eases to 3.17%

India's January retail inflation eases to 3.17%

This is highest level for the CPI level of inflation since June 2014.

Retail inflation eased in January to 3.17% on the back of a sharp slowdown in food price inflation.

According to Consumer Price Index (CPI) data released by the Central Statistics Office (CSO), the fall in retail inflation was mainly due to a drop in the annual food inflation - to 0.53 per cent in January from 1.37 per cent in December.

Inflation in vegetables was negative at (-) 15.62% from (-) 14.59% a month ago and for pulses and products, prices deflated by (-) 6.62%. The impact of demonetisation was visible in lower consumer demand as reflected by a decline in inflation for clothing and footwear, household goods and services and personal care.

"In the less likely event that crude oil prices do spike in the next few months, the excise hikes undertaken previously by the government on petrol and diesel could cushion inflation, at the cost of lower revenues", Nayar said.

He said: "With wage inflation only at around 2.6 per cent, it's slightly worrying because it looks like people will have slightly less disposable income going forward".

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Among the states, the retail inflation was lowest in Chhattisgarh, at 0.1 per cent, followed by Odisha at 1.8 per cent, and Andhra Pradesh at 1.9 per cent.

Food price inflation for the rural areas stood at 1.07 per cent in January 2017 against 2.06 per cent in December 2016 and 6.93 per cent in January 2016.

The prices of vegetables and pulses declined the most during the month of January from December.

The consumer demand in the country has taken hit after the government made a decision to scrap old Rs 500 and Rs 1,000 notes, almost 86% of the total cash in circulation.

Headline inflation has been under 4% since November, well below the RBI's 5% target for March and medium-term target of 4%.

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