Retail inflation surges to 6.01% in Jan, breaches RBI's target range

India's retail inflation in the month of January rose to 6.01 per cent, breaching the upper limit of the Reserve Bank of India's target range, mainly on higher consumer goods and telecom prices along with a comparatively low rate a year ago, according to data released by the Ministry of Statistics and Program Implementation on Monday.

The CPI-based inflation stood at 5.66 per cent in December 2021 post revision. 

Food inflation has also increased to 5.58 per cent in January from 4.05 per cent in December. Fuel and light inflation moderated to 9.32 per cent month-on-month from 10.95 per cent in December.

Inflation is climbing across the world and India is no exception but price rises have stayed relatively tame by historical standards, allowing the central bank to leave interest rates unchanged for now.

Still, prices of daily consumables like tea, cooking oil, pulses, among others, have increased by 20 per cent-40 per cent since the beginning of the COVID-19 pandemic.

The RBI has been mandated by the government to keep retail inflation at 4 per cent with a margin of 2 per cent on either side.

"The inflation reading came in line with our expectations. The Reserve Bank of India (RBI) too was expecting the reading to be around the upper limit. However, the trajectory is expected to have peaked out in January. More so, RBI's own H2 FY23 estimates remain closer to 4%, although lower than our estimates, thereby not warranting any concern on policy changes," said Upasna Bhardwaj, Senior Economist, Kotak Mahindra Bank.

Moreover, in its board meeting post Budget 2022 announcement, RBI's governor Shaktikanta Das earlier today said that the central bank is committed to its inflation mandate and the likely uptick in January inflation towards the upper end of its target band should not create any panic.

"There's a sort of major delicate balance between inflation and growth and the Reserve Bank is fully aware of its commitment to inflation," he added.

Last week, the RBI's monetary policy committee kept rates and its stance unchanged to ensure a broad-based recovery and projected retail inflation to ease to 4.5% in the next fiscal year.

Das also said the Reserve Bank of India is working on the borrowing programme for the next fiscal year, while the country's inclusion in global bond indexes is also a work in progress.

Meanwhile, the country's industrial production growth slowed down for a fourth straight month in December to 0.4 per cent mainly due to a poor performance by the manufacturing sector.

The manufacturing sector, which constitutes 77.63 per cent of the Index of Industrial Production (IIP), contracted by 0.1 per cent in December, according to the data released by the National Statistical Office (NSO) on Friday.

(With agency inputs)