Riding on the back of declining vegetable prices, retail inflation went down to 4.06% in January, according to the National Statistical Office (NSO) released on Friday.
The inflation based on the Consumer Price Index (CPI) was 4.59% in December 2020.
While the inflation of meat and fish rose by 12.54% in January, that of vegetables decreased by 15.84%. Another group where inflation decreased was sugar confectionery, which saw a decline of 0.26%. However, fruits saw an increase of 4.96%.
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Apart from these, the inflation of egg increased by 12.85% and milk products by 2.73%. Inflation of oils and fats rose by 19.71%.
The rate of price rise in the food basket was 1.89% in January, significantly down from 3.41% in December.
“The CPI has come down from 4.59 % in December 2020 to 4.06% in January 2021, indicating a consistent fall in the retail inflation in the last couple of months, owing to moderation in food inflation. Except for pulses food inflation has cooled down from 3.41% in December to 1.89% in January,” said Joseph Thomas, the head of research at Emkay Wealth Management.
“Finally, the inflation rate has come well below the RBI’s threshold rate, and this actually gives some relief to the markets on the immediate trajectory of interest rates. However, core inflation is perched at 5.70%, something that may take more time to move down,” he added.
Thomas said that the immediate threat of the price level pressures may not be there before the policymakers.
The Reserve Bank of India, which mainly factors in the retail inflation while arriving at its monetary policy, has been asked to keep CPI inflation at 4% (- 2%).
The price data are collected from representative and selected 1,114 urban markets and 1,181 villages covering all states/UTs through personal visits by field staff of Field Operations Division of NSO on a weekly roster.
“During the month of January 2021, NSO collected prices from 99.4% villages and 98.5% urban markets while the market-wise prices reported therein were 88.3% for rural and 92.3% for urban,” the NSO said in a statement.
