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In December, retail inflation fell to a 12-month low of 5.72%.

In November, wholesale price inflation fell to a 21-month low of 5.85%, helped by a favourable base and a strong decline in food inflation.
According to official statistics issued on Thursday, retail inflation fell to a one-year low of 5.72% in December, owing mostly to a strong deflation (-15.08%) in vegetables and easing pricing pressures in the broader “food and drinks” category. In November 2022, inflation was 5.88%.
For the second month in a row, headline inflation stayed below the upper limit of the Reserve Bank of India’s (RBI) medium-term objective of 2-6%. (it was previously above that range for 10 long months).
Despite the fact that the latest inflation report was substantially lower than expert estimates, the RBI is unlikely to delay the sixth round of rate hikes in February, which is largely projected to raise the policy repo rate to 6.5% from 6.25% now.
Concerns continue about persistently high “core inflation,” which increased to 6.1% in December from 6% in November, as well as persistently high inflation rates in the “fuel and light” (10.97%), “milk and milk products” (8.51%), and “clothing and footwear” (9.58%) categories. Inflation, as assessed by the consumer food price index, fell sharply from 4.67% in November to 4.19% in December.
“The correction in industrial input prices and supply chain pressures, if maintained, might assist relieve pressures on output prices; nevertheless, the anticipated pass-through of input costs could keep core inflation strong,” the RBI stated in its most recent monetary policy statement.
In November, wholesale price inflation fell to a 21-month low of 5.85%, helped by a favourable base and a strong decline in food inflation. For the first time since February 2021, wholesale price index inflation dipped below retail inflation rate, indicating that the pass-through of higher input costs to final product prices was nearing completion.
Though relatively benign global commodity prices and a favourable base will likely continue to lower retail inflation in the medium term, the situation remains cloudy. The next fiscal year’s pricing pressures on the economy will be impacted by geopolitical issues. The Chinese economic downturn and its influence on supply chains, along with the looming recession in the West, might play a significant role in imported inflation.
Nonetheless, retail inflation for Q3FY23 was 6.1%, half a percentage point lower than the RBI’s prediction. This indicates that the RBI’s and the monetary policy committee’s inflation projection for FY23 will be much lower than the 6.7% predicted by the RBI and the monetary policy committee (MPC). Analysts predict that CPI inflation would be slightly less than 6% in Q4 and less than 5% in Q1FY24.
For the 40th month in a straight, retail inflation has stayed over the RBI’s medium-term objective of 4%.

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