Retail inflation eases to 2.05% in January

Retail inflation declined marginally to 2.05 per cent in January over the previous month on continued decline in food prices, including vegetables and eggs, said government data Tuesday.

Thirteen out of the 23 industry groups in the manufacturing sector showed positive growth in December compared to the same month the previous year.

"It is noteworthy that the path of inflation has moved downwards significantly, and over the period of the next one year, headline inflation is expected to remain contained below or at the target of 4 per cent".

Analysts polled by Reuters had forecast January's annual increase in the consumer price index at 2.48 percent. In urban areas, the inflation rate was 2.91%, the same as in December. The RBI, which in its sixth bi-monthly monetary policy statement on February 7 cut policy rate by 25 basis points, had revised down its inflation projections citing low food inflation due to excess supply conditions domestically as well as internationally and larger than anticipated moderation in fuel inflation. India imports almost 80 percent of oil it consumes.

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Prime Minister Narendra Modi, who faces tough general elections by May, has announced an annual transfer of 750 billion rupees ($11 billion) to millions of farmers, and tax benefits for the middle class, which many economists say could spur both consumer spending and inflation. "This has opened up space for policy action", RBI Governor Shaktikanta Das said last week.

Retail inflation in January is the lowest since June 2017 when it had touched 1.46 per cent. Consumer Food Price Index (CFPI) inflation stood at (-) 2.17 per cent in January as against (-) 2.65 per cent in December. In rural areas, food prices fell 2.80% and in urban areas, it fell by 0.96%.

This year, other major central banks have also changed to a dovish stance in the face of rising worries about global growth and the impact of the U.S.

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