Retail inflation rises to 5.59% in December on higher food prices

India's retail inflation in the month of December rose to 5.59%, towards the upper limit of the Reserve Bank of India's target range, mainly on higher telecommunications charges, along with a comparatively low base one year ago, according to data released by the Ministry of Statistics and Program Implementation on Wednesday.

The CPI-based inflation was at 4.91% in November and 4.59% cent in December 2020.

Food inflation has also increased to 4.05% in December from 1.87% in November. Fuel and light inflation moderated to 10.95% year-on-year. It had risen to 13.35% in November 2021 from 14.35% in October. Inflation in the food and beverages basked stood at 4.47%, up from 1.87% in November.

The RBI has been mandated by the government to keep retail inflation at 4% with a margin of 2% on either side.

The RBI left its repo rate unchanged at 4.0% for a ninth consecutive policy meeting last month, sticking to its focus on economic growth as India still faces challenges from the coronavirus pandemic.

"While today's CPI print suggests the seasonal decline in food prices has begun to finally materialize, unfavourable base and elevated core inflation amid continued supply side bottlenecks due to Omicron will keep the headline print elevated around 5% over the next couple of months," commented Garima Kapoor, Economist - Institutional Equities, Elara Capital, Mumbai.