India’s retail inflation rises to 65-month high in December 2019

MUMBAI (Xinhua) – India’s consumer price index (CPI) in December rose to 7.35 per cent, the worst since July 2014 as per the data released by the government late Monday.

“CPI inflation came in higher than our expectations at 7.35 per cent vs 5.54 per cent last month, driven primarily by a sharp spike in food inflation and upward momentum in miscellaneous basket led by surge in telecom tariffs,” said Analyst with ICICI Bank Anushri Bansal, the second largest Indian bank in terms of assets and market capitalisation.

The inflation rate marks the third consecutive month in a row when the rate was above comfort zone of four per cent stated by the country’s central bank, destroying hopes of possible interest rate cut to stimulate growth.

“Food inflation might subside in the coming months, but the pressure on crude oil prices due to geopolitical tensions is an area of concern,” said Economist from domestic investment services company Geojit Financial Services Deepthi Mary Mathew.

She said the central bank will hold the rates in February, and would also keep a close watch on the fiscal deficit figures in the current scenario before resuming the rate cuts. Indian economy slumped to over six-year low of five per cent and 4.5 per cent growth rate in the April-June quarter and July-September quarter of 2019, respectively despite the country’s central bank reducing

policy rate by 135 basis points to 5.15 per cent during the year to boost growth.

However, the Central Bank kept rates unchanged in its last policy review meeting in December, citing concerns over inflation in the near term.

“RBI (central bank) may not hike the policy rates in the immediate future. It may not be able to cut the rates either.