Prices of vegetables increased by 60.5% in December 2019, as against an increase of 35.99% in November.

Money Inflation Monday, January 13, 2020 - 18:19

India’s retail inflation in December stood at 7.35%, again led by rising food prices. This is up from 5.54% in November and 4.62% in October, as per data released by the Central Statistics Office (CSO). However, core inflation stood at 3.7%.

This is the highest retail inflation recorded in India after five years. Retail inflation in May 2014 was 8.33%.

With this, the Consumer Price Index (CPI) has breached the RBI's target band. The RBI is mandated to keep inflation between 2-6%, with a margin of 2% on either side.

With prices of onions and garlic among others soaring to record highs, vegetables recorded an inflation rate of 60.50% in December, as against a price increase of 35.99% in November. Pulses and products recorded an inflation of 15.44% in December, against 13.94% in November.

Prices of meat and fish increased by 9.5% as against 9.38% in November. Prices of eggs increased by 8.7%, and prices of food and beverages overall increased by 12.16%.

The data assumes significance as the Reserve Bank, in its latest monetary policy review, maintained key lending rates on account of rising retail inflation.

November’s retail inflation of 5.54% was reportedly the highest in 40 months. In July 2016, retail inflation was at 6.07%. 

Nirmala Sitharaman is set to present the budget on February 1, and the RBI’s next monetary policy meet is on February 6, where it will take a decision on an interest rate cut.  

This also comes at a time when India's GDP growth has been forecasted to dip to an 11-year low of 5% in the current fiscal, primarily due to poor showing by the manufacturing and construction sectors. 

The RBI had also lowered its forecast for economic growth to 5% while announcing its bi-monthly monetary policy in December.

All eyes will now be on the upcoming union budget, where the government may address growth concerns and announce measures to improve the sentiments and boost growth. PM Modi has been meeting business leaders and economists to discuss the same.