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In a shocker, consumer price index (CPI) inflation touched 6.5 per cent in January, the Ministry of Statistics & Programme Implementation said on Monday, after being 5.72 per cent in December and 5.88 per cent in November last year, and economists termed it "worrisome".
"CPI inflation moved to 6.5 per cent in January is higher than our expectations and is worrisome. Sequentially, inflation has snapped a two-month contractionary streak as food inflation and core inflation remained firm," Rajani Sinha, Chief Economist, CARE Ratings told IANS. "Today's inflation shocker led by food as well as consistently higher core inflation momentum has depicted we are far from the 'durable disinflation' process," said Madhavi Arora, Lead Economist, Emkay Global Financial Services. Sinha said while vegetable prices contracted for the third straight month, the momentum was not strong enough to counter the sharp rise in essentials such as cereals, meat, fish, milk, and eggs. "The contribution of food inflation to overall inflation rose to 44 per cent in January from 37 per cent in December. Meanwhile, core inflation has remained sticky at 6.3 per cent as inflation for housing, personal care and healthcare moved higher," she added. According to Sinha, going forward, the sticky core inflation will remain a concern though the average CPI inflation is expected to moderate to 5.1 per cent in FY24 on the back of softening prices of cereals and pulses. The monetary policy tightening so far, and some fizzling of pent-up demand should also help ease CPI inflation. "This upside inflation surprise comes after RBI revised down its 4QFY23 CPI forecast by 20bps in the last MPC policy. This shows how uncertain the inflation trajectory can get, for even near-term estimates and possibly explains why they maintained the current stance of withdrawal of accommodation to keep policy flexibility ahead," Arora said. According to her, 4QFY23 inflation may now be possibly 50 bps higher than the RBI's revised estimate and could also force the RBI to further tighten their stance ahead. "From the policy perspective, we believe that further rate hikes are unlikely. However, we need to be cautious as RBI (Reserve Bank of India) has left the window open for possibility of another rate hike in case of a sustained rise in inflation," Sinha said. --IANS vj/vd ( 389 Words) 2023-02-13-22:36:04 (IANS)
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