TLI Staff
New Delhi: After a brief cooling period, consumer price index (CPI)-based inflation jumped to three months high of 6.5% in January 2023 as against 5.72% in the previous month on the back of higher food price level.
Retail inflation in January 2022 had stood at 6.01%.
Data released by Ministry of Statistics & Programme Implementation (MoSPI) on Monday showed rural inflation in the month of January was higher at 6.85% as compared to 6% in urban areas.
Food inflation during this period witnessed upward trend and registered 5.94% year-on-year increase as compared to 4.19% in December 2022.
The official data showed cereals and products inflation surged to 16.1% in January 2023 from 13.8% in December 2022. Rise in food and beverage inflation was seen across most commodity group barring prepared oils and fats, sugar and confectionery, and fruits.
Milk and products inflation reached 8.79% in January 2023. Vegetable prices continued declining trend.
The cereals inflation spiked despite government decision to sell wheat in open market.
Commenting on inflation numbers, India Ratings and Research Principal Economist Dr Sunil Kumar Sinha said, “As observed over the past few months the core inflation remained sticky and again came in at 6.1% in January 2023. When seen against the weak and uneven consumer demand, this suggests that the stickiness in the core inflation is a more a supply side issue than demand side issue.”
In its bi-monthly monetary policy this month, Reserve Bank of India (RBI) hiked policy repo rate by 0.25% to 6.50% with immediate effect to keep inflation in check.
The RBI is mandated to maintain price stability in the country and keep retail inflation at 4% with a variation of 2% on either side.
“The sudden spike in the inflation numbers, when the central bank was showing signs of comfort with the inflation trend is likely to have a bearing on the rate action. If the inflation stays elevated for another month or two, it will have a negative impact in the form of another rate hike in April and further liquidity tightening,” said Nish Bhatt, Founder & CEO, Millwood Kane International.
The RBI’s Monetary Policy Committee (MPC) or rate-setting panel is scheduled to next meet in April.
“Owing to the dip in food prices, the headline CPI inflation is projected to soften mildly to 6.3% in Feb 2023, while remaining above the MPC’s 6% tolerance level owing to the stickiness in core inflation,” said ICRA Chief Economist Aditi Nayar.