NEW DELHI, Jan 14: India’s retail inflation rate based on Consumer Price Index is expected to remain below RBI’s comfort zone of 6 per cent and will decline materially to 5 per cent by March 2023, said SBI Research in its latest Ecowrap report.
For January-March 2023, the average retail inflation is seen at 4.7 per cent. According to the latest data released by the ministry of statistics, the retail inflation during the month of December was at 5.72 per cent. The latest figures, released on Thursday, showed a marginal decline and further moderation in retail inflation as compared with the previous month.
The retail inflation was 5.88 per cent in November from 6.77 per cent in October. The retail inflation in India had remained above 6 per cent till October for over three quarters, which was beyond RBI’s comfort zone.
“CPI inflation fell to a 12-month low of 5.72 per cent in Dec’22, along expected lines, primarily due to huge decline in vegetable prices with sowing practices by farmers undergoing a tectonic shift, aligning with better weather and technology forecasting,” SBI Research report authored by Group Chief Economic Adviser of State Bank of India Soumya Kanti Ghosh said.
“Against the evolving landscape, we see little incentive for further (repo) rate hike, with synchronised past actions on rate front yet to show the full impact,” it added.
In its fight against rising inflation, RBI had already hiked the key policy rate by 225 basis points since May 2022 to 6.25 per cent to cool off domestic retail inflation that stayed above its upper tolerance limit for nearly three quarters.
Raising interest rates typically cools demand in the economy, thereby putting a brake on inflation.
The latest hike was on December 7 last year, when the Monetary Policy Committee (MPC) of the RBI increased the policy repo rate by 35 basis points, besides deciding to remain focused on the “withdrawal of accommodation” of monetary policy to ensure that inflation remains within the target going forward, while supporting economic growth.
The next three-day RBI monetary policy meeting is scheduled for February 6-8. (ANI)