Retail inflation slightly eased in January from a 17-month high in December but remained above the 4 per cent medium term target of the Reserve Bank of India (RBI) for the third straight month.
Measure of consumer price inflation, the CPI index, rose 5.07 percent in January from a year earlier, data released by the Ministry of Statistics showed on Monday.
Analysts polled by Reuters had predicted January's rate would ease to 5.14 per cent from 5.21 per cent in December.
Last week, the RBI held its main repo rate unchanged, for the third straight meeting. The central bank warned that it would closely monitor inflation but also said economic growth needed to be “carefully nurtured”.
The central bank's statement was less hawkish than many expected, and prompted some economists to change their predictions of a rate increase in the next few months.
“I do not expect a rate hike for the next five to six months,” said Raghvendra Nath, managing director of Ladderup Wealth Management.
He said apart from oil prices, the monsoon rains would be the key factor for inflation.
Consumer food prices rose 4.70 per cent in January, compared with 4.96 per cent in December, as prices of pulses fell 20.19 per cent from a year earlier. Food prices have softened, reflecting eased vegetable costs following stepped-up arrivals in markets of fresh crops.
Fuel and light inflation stood at 7.58 percent compared with 7.90 percent in December, while housing inflation stood at 8.33 per cent from 8.25 per cent in the previous month.
The central bank has raised its inflation forecast to 5.1 per cent for the January-March quarter, compared with 4.6 per cent for October-December, citing price pressures from higher import taxes announced in the budget on Feb. 1, pushing up food and fuel prices.
Rising prices
Retail inflation is seen accelerating, especially after a budget increase in some import taxes and the widening of the fiscal deficit for the year beginning April 1 to finance a sharp rise in spending on rural areas and health-care.
The central bank expects retail inflation to pick up to 5.1-5.6 percent in April-September before easing, assuming normal rainfall.
It will next review the policy on April 5.
Separately, India's annual industrial output grew 7.1 percent in December, data released on Monday showed, compared with 6.2 percent forecast in a Reuters poll.
The world's seventh largest economy is expected to grow 6.5 percent in the fiscal year ending in March, while the International Monetary Fund expects growth will pick up to 7.4 percent in 2018, and 7.8 percent in 2019 - driven by a pickup in domestic and global demand.
