Retail inflation eases considerably to 4.59 per cent in December; well within RBI target

India's retail inflation eased considerably to 4.59 per cent in December due to a significant drop in vegetable and food prices. The retail inflation which is measured by the Consumer Price Index (CPI) was 6.93 per cent in November. Softening of vegetable prices and a low base effect played a vital role in the decline of inflation.

The numbers also mark the lowest inflation print since November 2019, giving some relief to the Reserve Bank of India (RBI), which has been caught between boosting economic growth and curbing high inflation.

Inflation Streak

Inflation had been above the central bank's target range of 2%-6% for the eight months since April, a streak not seen since August 2014.

RBI & Inflation targeting
The RBI primarily factors in retail inflation while deciding its bi-monthly monetary policy. In its bi-monthly monetary policy meeting earlier this month, the central bank had kept its key interest rates unchanged and decided to maintain its accommodative stance.

The Central Bank slashed interest rates by 115 basis points in March and May to stimulate growth in an economy battered by the coronavirus pandemic, but it has held the key repo rate at 4% since then, cautious of rising inflation.