Retail inflation at 3-month low in Dec on drop in veggie prices

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Retail inflation moderated to the single-digit level of 9.87 per cent in December, marking a three-month low, thanks to the easing of vegetable and fruit prices.

The trend along with a possible lower wholesale price inflation in December may make RBI look at monetary easing in its policy on January 28.

That and a sharp fall in core inflation, sluggish investment and the 2.1 per cent drop in November industrial output are seen as a push enough for RBI to go easy on the tight money policy.

Analysts say the December retail inflation, data for which were released on Monday, is not a flash in the pan. It is certainly because of a correction in the price spike in fruit and vegetables.

Monday’s release also revised retail inflation, as measured by the consumer price index (CPI), for November marginally downwards to 11.16 per cent from 11.24 per cent.

“Retail inflation, which encountered blip due to high fruits and vegetable prices due to weather conditions has not got corrected,” Crisil principal economist D K Joshi said, adding wholesale inflation too will slowdown hereafter.

WPI for December, to be announced on January 15, is expected to be 50 basis points lower than in November. C Rangarajan, chaiman of the PM’s economic advisory council, has forecast that it could be as low as 6.5 per cent in December. WPI rose to 7.52 per cent in November from 7 per cent in October because of higher prices of fruit, vegetables and eggs.

Fruit prices rose by 14.64 per cent (15 per cent rise in November). Pulses were dearer by 2.15 per cent, cereals by 12.14 per cent and milk products by 9.87 per cent. Protein-rich items such as eggs, meat and fish became dearer by 12.64 per cent. Inflation for rural and urban areas was 10.49 per cent and 9.11 per cent, respectively.

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