After 17-month high, retail inflation softens to 5.07% in January

Retail inflation marginally eased to 5.07 per cent in January due to easing prices of vegetables, fruits and fuel components, the Central Statistics Office (CSO) data showed on Monday.

Earlier foreign brokerage Morgan Stanley had said retail inflation is expected to moderate and print at 5 per cent after rising consecutively for five months, helped largely by seasonal dip in vegetable prices, while trade deficit is also likely to improve.

Based on Consumer price index (CPI), the inflation was at 5.21 per cent in December - a 17-month high, and 3.17 per cent in January last year.

The data released by the Central Statistics Office (CSO) showed that the rate of price rise for consumer foods eased to 4.7 per cent in January, from 4.96 per cent in December.

Inflation in the vegetable basket slowed to 26.97 per cent as against 29.13 in December. Prices of fruits too rose at a lower pace of 6.24 per cent last month, as against 6.63 per cent recorded in the preceding month.

For the fuel and light segment, inflation was 7.73 per cent last month compared to 7.90 per cent in December.

Price data are collected from selected towns by the Field Operations Division of NSSO and from selected villages by the Department of Posts.

However, Morgan Stanley flagged concern that "moderate risks to macro stability are emerging on account of the wider-than-targeted fiscal deficits".

According to the brokerage, the debate on the re-emergence of macro stability risks has intensified owing to the rising headline inflation, widening trade deficit and also the widening the fiscal deficit targets for both the current and next fiscals.

"Against this backdrop, the attention on the incoming monthly data will likely be on the inflation and trade deficit prints," the brokerage said in the report.

The brokerage expects exports to grow at 16.8 per cent in January compared to 12.5 per cent in December.

with PTI inputs