Retail Inflation Soars To 6.52% In January After Declining For 2 Months

After falling for 2 months, retail inflation soared in January to 6.52%, according to data released on February 13, 2023 by Ministry of Statistics and Programme Implementation.

The rise in retail inflation was expected to surge because of an unfavourable base effect from last year.

It is worth mentioning that CPI (Consumer Price Index) inflation was above the Reserve Bank of India's upper targeted limit of 6% for the first time in a period of 3 months. The last high was registered in October 2022 at 6.77%.

Meanwhile, Vivek Rathi, Director-Research, Knight Frank India said, "After softening to sub 6% for two consecutive months, headline inflation in India inched back to 6.5% in Jan 2023 which can get concerning for the RBI. The spike in Jan 2023 headline inflation was led by surge in food prices, primarily cereals. Inflationary pressure in Jan 2023 was witnessed across non-food categories as well."

"Prices rise in categories such as clothing & footwear, fuel, etc. has consistently remained high. Similarly, inflation across core categories as well, continues to remain sticky at 6%. This, overall increase in prices has caused shrinkage in disposable incomes of the households which could impact their purchasing capacity," added Vivek Rathi

Rise in food prices is believed to be one of the main factors behind surge in retail inflation with food inflation rising to 5.94% in January from 4.19% in December.

According to Raghvendra Nath, MD, Ladderup Wealth Management, "CPI breached the upper tolerance band of RBI again at 6.52% higher than the market expectations of 6.1%. Costly food items and rise in oil prices pushed the inflation upwards. India's dependence on oil imports continues to affect India's inflation. We may see further rate hikes from RBI if the inflation figures continue to stay above the upper band. This will dampen the mood of the street as it was expecting inflation to cool off in line with RBI's expectations (5.7% for Jan-Mar'23)."

Nish Bhatt, Founder & CEO, Millwood Kane International said, "The January CPI inflation print at 6.52% is a cause of concern, it is a 3-month high. The inflation has spiked after two months of moderation. What is also concerning is the core inflation above the 6% mark. Food inflation at 5.94% and elevated pulses prices are primarily responsible for the elevated inflation."