India's retail inflation eases in January; here's what experts have to say

NEW DELHI: Retail inflation in India eased in January to 5.10 per cent on an annual basis compared to a four-month high of 5.69 per cent in December. Inflation rates in rural and urban areas, respectively, stood at 5.34 per cent and 4.92 per cent, down from 5.93 per cent and 5.46 per cent, reported in the same month a year ago, official data put out by the Ministry of Statistics and Programme Implementation showed Monday evening.

The retail inflation in India though is in RBI's 2-6 per cent comfort level but is above the ideal 4 per cent scenario. The eased month-on-month retail inflation comes close on the heels of RBI having maintained the status quo in the repo rate for the sixth straight occasion.

Barring the recent pauses, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline. Following are some of the excerpts of views from analysts and experts on the January retail inflation numbers:

Dharmakirti Joshi, Chief Economist, CRISIL Ltd: Fuel prices continued to fall on-year, but the pace of the decline slowed. Disruption along the critical Red Sea route is a risk for fuel, commodity, and core inflation. Against this backdrop, we expect that the RBI will hold interest rates steady till at least the June policy review.

Raghvendra Nath, MD, Ladderup Wealth Management: Should this trajectory persist, the Reserve Bank of India (RBI) may find increased confidence in implementing rate cuts, particularly in alignment with similar actions by the Federal Reserve.

Rajani Sinha, Chief Economist, CareEdge Ratings: Looking ahead, a favourable base effect is expected to persist until July 2024, helping absorb potential upward risks to price pressures to a certain extent. Additionally, the arrival of the early harvest in the market over the next few months is anticipated to alleviate price pressures further.

Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI: While headline retail inflation cooled in January, it has now spent 52 consecutive months above the RBI medium-term target of 4 per cent. On the positive side, inflation has now been within the tolerance range of 2-6 per cent for the fifth month in a row.

Nikhil Gupta, Chief Economist, Motilal Oswal Financial Services: Overall, we see inflation hovering between 5-5.5 per cent, led by food in 1HCY24, before easing in 3Q towards 4 per cent and rising back to 4.5-5 per cent in the next two quarters. Thus, we don't see any monetary policy action based on inflation this year. It will be determined by the domestic growth trajectory (if it turns out much weaker than the general forecast of 6.5-7 per cent) or if the US FED makes a sharp move.

Madhavi Arora, Lead Economist, Emkay Global Financial Services: We maintain that the RBI will not precede the Fed in any policy reversal in CY24 and policy management will have to stay vigilant amid the fluidity of global narratives.