Retail inflation softens to 19-month low of 2.05% in January

Reserve Bank of India head office in Mumbai | Punit Paranjpe  AFP  Getty Images

It softened to 5.4 percent in January, according to economists at Yes Bank Ltd. and Axis Bank Ltd. Pranjul Bhandari, chief India economist at HSBC Holdings Plc, sees it slowing to as low as 4 percent this year. "The latter should underpin a 0.2% m/m print on core CPI, translating to a 2.1% y/y increase vs 2.2% previously". Please refresh the page for the fullest version.

Separate official data showed growth in industrial production - determined by Index of Industrial Production (IIP) - picked up to 2.4 per cent in December.

The CPI including owner-occupiers' housing costs (CPIH) - the ONS's preferred measure of inflation - was 1.8 per cent in January, down from 2 per cent in December.

Inflation peaked at a five-year high of 3.1% in November 2017, above the level of pay growth for British workers, although it has gradually fallen.

Thirteen out of the 23 industry groups in the manufacturing sector showed positive growth in December compared to the same month the previous year.

Inflation pressures have eased in recent months, following falls in food and crude oil prices. This, combined with a negative base effect, may lead to a four-tick decline of the year-on-year rate to 1.5%.

The prices of vegetables declined 13.32% while prices of sugar and confectionery dropped 8.16%. The RBI, which in its sixth bi-monthly monetary policy statement on February 7 cut policy rate by 25 basis points, had revised down its inflation projections citing low food inflation due to excess supply conditions domestically as well as internationally and larger than anticipated moderation in fuel inflation.

Headline inflation in India has been pulled down to a large extent by low food prices.

Inflation was dragged down by lower energy and fuel prices. Prices of health related goods increased 8.93% while education related goods rose by 7.99%. "Our expectations for the next few months are also very benign on headline CPI and hence we believe that there is room for further accommodation in the next policy meeting".

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