Surge in food prices drives inflation to 6-month high

New Delhi: Rising prices of essential kitchen items pushed the retail inflation to a six-month high of 5.59 per cent in December, close to the Reserve Bank's upper tolerance limit of 6 per cent. The Consumer Price Index (CPI) based retail inflation was 4.91 per cent in November 2021 and 4.59 per cent in December 2020.

The RBI, which mainly factors in the CPI-based retail inflation while arriving at its bi-monthly monetary policy, has been tasked by the government to keep the inflation at 4 per cent with margin of 2 per cent on either side (that is, in the range of 2-6 per cent). Retail inflation has been rising since October 2021. In July too the rate of price rise was 5.59 per cent but it slowed in the subsequent two months, before starting to move up from October.

Aditi Nayar, chief economist at Icra, said the increase in CPI inflation in December 2021 relative to the previous month was primarily led by food and beverages, and clothing and footwear. There was a welcome moderation in the prints for fuel and light, and pan, tobacco etc amidst a mild dip in miscellaneous items and housing, she added. "Overall, we expect the headline CPI inflation to range between 5.7 - 6 per cent in Q4 FY2022, as compared to the MPC's (Monetary Policy Committee) forecast of 5.7 per cent.