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Retail inflation hits 5-yr high of 7.35 pc in Dec: NSO

Spiralling food prices, especially vegetables, sent retail inflation soaring in December 2019 to five-and-a half year high of 7.35 per cent, nearly double of the RBI’s comfort level, with experts warning that factors like rail fare hike may contribute to further uptick in core inflation in the ongoing month.

Retail inflation hits 5-yr high of 7.35 pc in Dec: NSO
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New Delhi

This diminished the chances of the RBI cutting interest rate at its next monetary policy review due in early February.

As per National Statistical Office (NSO) data released on Monday, the spike in inflation in the vegetable segment was 60.5 per cent in December 2019 compared to the previous year. The overall food inflation rose to 14.12 per cent in December as against (-) 2.65 per cent in 2018. ‘Pulses and products’ recorded 15.44 per cent inflation, while it was nearly 10 per cent in case of ‘meat and fish’. The overall retail inflation based on Consumer Price Index (CPI) was 2.11 per cent in December 2018 and 5.54 per cent in November 2019. The previous high was 7.39 per cent in July 2014, soon after Narendra Modi-led government first assumed office. The Centre has mandated the RBI to keep inflation in the range of 4 per cent, with a margin of 2 per cent.

ICRA principal economist Aditi Nayar said rail fare revision, spike in prices of some automobile categories and an unfavourable base effect may contribute to further uptick in core inflation to around 4 per cent in the ongoing month.

“Even though we expect the headline CPI inflation to correct sharply in January 2020 and further in February 2020 from the unpalatably high 7.35 per cent recorded in December 2019, it is expected to remain above 4.3 per cent in the next few quarters,” she said.

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