India retail inflation rises to 5.59% in December, hits 5-month high

India's benchmark inflation rate, measured by the Consumer Price Index (CPI) firmed up to 5.59% year-on-year in December 2021, data released by the Ministry of Statistics and Programme Implementation on Monday showed.

A survey of economists by Reuters had forecast that Indian retail inflation rose to 5.80%. In November, the retail inflation had firmed up to 4.91% year-on-year, up from 4.48% in October 2021. Back in December 2020, retail inflation stood at 4.59%. India's retail inflation came in at 5.59% in July 2021 post which the headline reading had treaded lower.

Fuel and light inflation moderated to 10.95% year-on-year. It had risen to 13.35% in November 2021 from 14.35% in October. Inflation in the food and beverages basked stood at 4.47%, up from 1.87% in November.

With this, the CPI has remained within the RBI's tolerance level for the sixth consecutive month. According to the Monetary Policy Committee’s official mandate, the rate-setting panel is supposed to keep inflation in a band of 2-6%, with the medium-term target being 4%.

Retail inflation has now been above the RBI’s medium-term target for more than two years.

“The recent correction in prices of many food items other than tomatoes, has provided relief for the inflation trajectory, especially given the unfavourable base effects that lie ahead. The headline CPI inflation appears to range between 5.7-6.0% in the following quarter. In our assessment, as long as the CPI inflation remains within the target of 2-6%, the MPC and RBI will prefer to prioritize growth, and maintain policy support to impart sustainability to the recovery and help it to broaden,” ICRA’s Aditi Nayar wrote in a note earlier.