Bad news for central government: Retail Inflation no more within the RBI comport Zone

Retail inflation: In January 2023, an increase has been recorded in the figures of retail inflation. In December 2022, the inflation rate had come down from 6 percent. In the year 2023, the government has suffered its first major setback on the inflation front. In the month of December, the retail inflation had come down to below 6 per cent. Bad news for central government: Retail Inflation no more within the RBI comport Zone.

Due to which it was being speculated that there could be more relief from inflation in the coming days, but in January, a sudden spurt in the inflation rate has been registered. Retail inflation has once again crossed 6 per cent.

Slow industrial production

After the decline in December 2022, the retail inflation has jumped in January 2023. The retail inflation rate in January has been 6.52 percent, while in December 2022 it was 5.72 percent. Earlier, a decline has also been recorded in the country’s industrial production (IIP) figures. In December 2022, it has come down to 4.3 percent. In November 2022, industrial production had increased by 7.3 percent.

The inflation rate based on the Consumer Price Index (CPI) was 5.72 percent in December 2022 and 6.01 percent in January 2022. The Reserve Bank has been mandated by the central government to ensure that the retail inflation rate remains at 4 percent with a plus or minus margin of 2 percent. The increase in the figures is being seen due to the inflation of food basket, whose inflation rate has increased from 4.19 percent in December to 5.94 percent in January.

Increase in the inflation of food basket means that the prices of food items have increased. The inflation rate of milk and products made from it has been 8.79 percent in January. The prices of have also increased and its inflation rate has been 21.09 percent. The inflation rate of vegetables is negative and it has been -11.70 percent. Food inflation is about 40 per cent of the CPI basket. The prices of cereals and milk continue to rise.

Repo rate has increased

In the recent Monetary Policy Committee (MPC) meeting, Reserve Bank Governor Shaktikanta Das had said that inflation is expected to increase by 6.5 per cent in FY23. The Reserve Bank has recently increased the repo rate by 25 basis points.

In December 2022, the retail inflation rate (CPI Inflation) was at 5.72 percent. After a long time, it came within the target set by the Reserve Bank. But in January it has once again gone out of the purview of the Reserve Bank.

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