Retail inflation rises to 3-month high of 6.52% in January

A vegetable seller waiting for customer at a market, in New Delhi.
| Photo Credit: Sushil Kumar Verma

India’s retail inflation shot back up to 6.52% in January after a two-month streak below the 6% mark, with consumer food prices hardening again to 5.94% from 4.2% in December 2022, aided by a broad-based pick-up in price trends across goods and services.

Vegetables which had reported a 15.1% fall in prices in December 2022, continued to be in deflationary territory falling 11.7% in January 2023, but most other food items continued to witness spiralling prices.

Cereals inflation surged from 13.8% in December to 16.1%, milk products accelerated from 8.5% in the previous month to 8.8%, and spices jumped from 20.3% inflation to 21.1% in January.

Rural inflation, which has outstripped urban inflation in recent months, firmed up from 6.05% in December to 6.85% in January, while urban consumers faced retail price of 6% in January, compared to 5.4% in December.

The previous high was 6.77% in October.

There were no base effects at play as January 2022 had recorded 6.01% retail inflation, the beginning of a ten month streak over the 6% upper tolerance threshold set for the Reserve Bank of India.

Inflation in eggs sped from 6.9% in December to 8.8% in January, while the pace of price rise in meat and fish rose from 5.1% to 6.04%. Fruits, Sugar and confectionary products, pulses, non-alcoholic beverages and prepared meals and snacks, all recorded an uptick in inflation rates month-on-month.

Clothing and footwear inflation cooled slightly from 9.6% to 9.1%, but footwear price rise remained steep at 10.5%. Fuel and light inflation eased marginally from 11% in December to 10.85%, as did transport and communication (from 4.9% to 4.5%).

Personal care and effects saw a sharp rise in inflation to 9.6% in January from 8.1% a month earlier, and healthcare inflation accelerated from 6.1% in December 2022 to 6.4% in January.

Among the major States, Telangana recorded the highest inflation in January at 8.6%, followed by Andhra Pradesh (8.25%), Madhya Pradesh (8.13%), Uttar Pradesh (7.45%) and Haryana (7.05%)

“Inflation remains fairly generalized across most categories as companies are still passing on higher input costs to consumers,” said Madan Sabnavis, chief economist at Bank of Baroda, who reckoned that the central bank may consider further rate hikes after this month’s moderate 25 basis points (bps) interest rate raise if inflation remains above 6% through February and March. “There is scope for some the government to consider action on the taxes front especially fuel – both centre and states to cool down inflation,” he averred.

One basis point equals 0.01 percentage point.