Retail inflation hits 5.69% in December, highest since August 2023

Retail inflation

New Delhi: The retail inflation, measured by the Consumer Price Index (CPI), rose to a four-month high of 5.69 percent in December 2023, mainly driven by higher food prices. The CPI-based inflation was 5.55 percent in November 2023 and 5.72 percent in December 2022. The last time inflation was higher than this level was in August 2023, when it reached 6.83 percent.

According to the data released by the National Statistical Office (NSO), food inflation increased to 9.53 percent in December 2023, compared to 8.7 percent in the previous month and 4.9 percent in the same month a year ago. The prices of cereals, milk products, spices, eggs, meat, and fish rose significantly in December, contributing to the rise in food inflation.

The retail inflation also reflects the impact of higher commodity prices in the global market, which have increased the import cost for some of the crucial consumables, such as fuel and edible oil. The core inflation, which excludes food and fuel prices, increased to 6.2 percent in December 2023 from 6.1 percent in November 2023.

retail inflation

Retail inflation is an important indicator for the Reserve Bank of India (RBI), which is mandated to keep inflation within the range of 2 to 6 percent, with a target of 4 percent. The RBI uses the repo rate, the rate at which it lends to commercial banks, as a tool to control inflation and the money supply in the economy. The RBI had raised the repo rate by 25 basis points to 6.5 percent in its monetary policy review in February 2023, to curb the inflationary pressures.

The rising inflation poses a challenge for the RBI, as it has to balance price stability with economic growth, which has been recovering from the impact of the COVID-19 pandemic. The RBI has projected the real GDP growth for 2023-24 at 9.5 percent. However, the persistent high inflation may dampen the consumer demand and the business confidence, and affect the growth prospects in the coming months.