Retail inflation jumps to 6.01% in January; RBI governor says no cause for alarm

Reserve Bank of India governor Shaktikanta Das has said that the January 2022 inflation rate should not surprise or create any alarm.

"As far as India is concerned, if you look at the momentum of inflation right from last October onward, it is on a downward slope. It's primarily the statistical reasons, the base effect, which has resulted in higher inflation especially in Q3 and the same base effect will play in the coming months," Das said in a press conference.

India's benchmark inflation rate, calculated by the Consumer Price Index (CPI), rose to a seven-month high of 6.01% in January 2022, data released by the Ministry of Statistics and Programme Implementation on Monday showed.

The January 2022 CPI inflation was marginally above the 6.0% upper threshold of the monetary policy committee's medium term forecast range of 2-6% for the first time since June 2021. The Consumer Price Index-based inflation stood at 5.56% in December 2021.

"The sequential hardening in the CPI inflation in January 2022 was driven by food and beverages, and clothing and footwear, whereas pan, tobacco and intoxicants, fuel and light, miscellaneous items and housing displayed some welcome cooling," research and rating firm ICRA said in a report.

"Notwithstanding the higher rabi area sown inFY2022 and the YoY increase in reservoir storage, the recent rebound in prices of many essential commodities does not augur well for food inflation for the current month," it said, adding that the limited transmission of the current rally in crude oil prices into domestic retail prices may provide a temporary respite in the ongoing month.

India's wholesale price inflation, however, fell marginally to a four-month low of 12.96% in January 2022 from 13.56% in December 2021.

Price stability, which basically means maintaining and adhering to the inflation target, is definitely upper most in our mind, Das said, adding that the character and the content of inflation in advanced economies is different from the character and content of inflation in India. "There is a delicate balancing between inflation and growth and the RBI is fully aware of its commitment to inflation, keeping in mind the objective of growth."

Last week, the monetary policy committee retained CPI-based retail inflation forecast of 5.3% for FY22. It, however, expects CPI inflation to moderate to 4.5% in FY23. The RBI governor had earlier said that inflation is expected to peak in the fourth quarter of the current fiscal.

The MPC had noted that consumer price inflation has edged higher since its last meeting and the hardening of crude oil prices present a major upside risk to the inflation outlook. The MPC had said that the potential pick up of input costs is a contingent risk, especially if international crude oil prices remain elevated. "The pace of the domestic recovery is catching up with pre-pandemic trends, but private consumption is still lagging. Covid-19 continues to impart some uncertainty to the future outlook."