India’s retail inflation cools to 5.72% in Dec 2022

India's retail inflation, measured in Consumer Price Index (CPI), eased further to a one-year low of 5.72% in December 2022, down from 5.88% in November 2022, thus staying below the Reserve Bank's upper threshold of 6% for the second month in a row, the government data shows.

While urban inflation in December 2022 declined to 5.39% from 5.68 in November 2022 and 5.90% in the year-ago period, rural inflation remained higher at 6.05%, dipping marginally from 6.09% in November 2022 and up from 5.36% in the year-ago period, the data released by the Ministry of Statistics & Programme Implementation shows.

The retail inflation measured by the Consumer Food Price Index declined to 4.19% in December 2022 from 4.67% in November 2022 and up from 4.05% in the year-ago period.

Food price inflation in rural areas was higher at 5.05%, while it was 2.80% in urban areas in December 2022, marking a wide disparity in Consumer Food Price Index in both rural and urban areas.

In the food basket, vegetable prices continued to see deflation at 15.08% in December from 8.1% in November. Inflation in cereals and products, spices and milk & products stood high at 13.79%, 20.35% and 8.5%, respectively.

In other categories, clothing and footwear inflation dipped to 9.58% in December from 9.83% in November. The inflation in the fuel and light category increased to 10.97% in December from 10.62 in November.

Before November, the average retail inflation had remained above the upper tolerance level for three consecutive quarters in January-September 2022, and October 2022 as well.

The government has cited soaring commodity prices at the international level and pandemic-induced supply-demand imbalances for soaring inflation worldwide, including in India. The Russia-Ukraine conflict is also believed to have exacerbated the inflationary pressures in crude oil, gas, metals and edible oils. In India, the onset of heat waves and uneven rainfall in the later part of the monsoon season also led to crop damage and a rise in vegetable prices.

The government data shows that headline inflation rose from 3.59% in FY18 to 5.51% in FY22. In this fiscal so far, the retail inflation rose to a new high of 7.79% in April, 7.04% in May, 7.01% in June, 6.71% in July, 7% in August, 7.41% in September, 6.77% in October and 5.88% in November. The retail inflation rates for the three quarters of 2022 stood at 6.3% in Jan-March; 7.3% in April-June; and 7% in July-September.

The RBI's inflation target for the current financial year 2022-23 (FY23) is 6.7%, cautioning that despite the downward trend, the battle against inflation is yet not over. It revised the inflation projection for Q3 to 6.6% and Q4 to 5.9%, respectively. The CPI inflation is projected at 5% for Q1 FY24, and 5.4% for Q2 FY24, on the assumption of a normal monsoon.

Meanwhile, India's factory output, measured based on the Index of Industrial Production (IIP), rose to 7.1% in November 2022, the data shared by the Ministry of Statistics and Programme Implementation data showed.