New Delhi, January 13: The retail inflation is likely to inch up further in December on account of a substantial spike in vegetable prices in India. Earlier, the CPI inflation in November rose from 4.62 per cent to 5.54 per cent, which was highest in the last three years.
In the last two months, the prices of onions, which is a part and parcel of Indian cuisine, increased many folds, leading to an increase in food inflation that has, in turn, contributed to an increase in retail inflation. This CPI inflation has also breached the medium-term target of RBI, which is at 4 per cent, for the straight third month. The government on Monday will release the CPI inflation numbers. As the prices of vegetables are rising exponentially, the CPI inflation number is expected to be above 6 per cent in December.
As the budget is around the corner, this retail inflation number is very crucial and will be watched out for. However, the wholesale inflation rate (WPI) was recorded at 0.2 per cent and 0.3 per cent in September and October respectively. The WPI rose to 0.6 per cent in November. Taking cognisance of rising CPI and WPI, the central bank in its last monetary policy meeting in December decided unanimously not to go for any rate cut and wanted to let the benefit of previous rate cuts pass through fully.
However, having a look at the growth rate numbers of the economy, one can understand the prolonged slowdown India is in. India’s economy is growing at dismal 4.5 per cent, which is lowest in the last six years.
Another important indicator that has shown little resilience is India's industrial production (factory output) is again back in the positive zone and grew at 1.8 per cent month-on-month in November 2019, according to the Index of Industrial Production (IIP) data.
Due to exorbitant vegetable prices, it would be interesting to see whether the CPI inflation numbers come within the expected range or is it going to be another shocker for us.