Food prices pushes India retail inflation to four-month high in December

Food prices pushes India retail inflation to four-month high in December


Pakistan too has been facing food inflation challenge; The problem is far more serious in our case

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NEW DELHI (Web Desk) – It seems the two neighbours Pakistan and India are unable to arrest food prices – the problems are far more serious in our case – a trend that is fuelling inflation, worsening the cost-living crisis for the millions of people.

The latest data shows, according to Reuters, India's annual retail inflation rose at the fastest pace in four months in December, driven by a rise in prices of some food items, raising expectations that the central bank will stay away from interest rate cuts for some time.

Annual retail inflation rose to 5.69 per cent in December from 5.55pc the previous month, above the central bank's 4pc target, Indian government data showed on Friday.

A Reuters poll of 56 economists had forecast a rate of 5.87pc.

However, things are totally different at the policy level when Pakistan and India are compared.

New Delhi has regularly been imposing curbs on food exports to check prices in domestic market. However, we in Pakistan have been celebrating the rising food exports which are creating a demand and supply issue, thus pushing the food prices higher.

Reuters says food inflation, which accounts for nearly half of the overall consumer price basket, was at 9.53pc in December, up from 8.70pc in November as prices of vegetables, pulses and spices rose.

"The outlook for the inflation for certain items like rice, wheat and pulses remains somewhat vulnerable," said Aditi Nayar, an economist at ICRA, who does not expect rate cuts before August 2024.

The Reserve Bank of India's (RBI) monetary policy committee left the benchmark repo rate unchanged at 6.50pc for a fifth consecutive meeting last month. With inflation remaining above the central bank's target, monetary policy could remain in "restrictive territory", the RBI said in a report last month.

Core inflation, which strips out volatile energy and food prices, was estimated to be 3.8pc-3.89pc in December, compared with 4.05pc-4.2pc in November, according to two economists.

The Indian government does not release core inflation figures.

Core inflation has declined to a four-year low, said Devendra Pant, chief economist at India Ratings & Research.

Declining core inflation, which can often reflect weak demand in the economy, is a "conundrum" at a time of strong economic growth, said Pant.

The Indian economy is seen growing at 7.3pc in the financial year ending March 31, 2024, according to the government's estimates.

Prime Minister Narendra Modi, who remains popular among voters and is aiming to win a third term in a general election due by May, has taken several steps to contain food prices.

Some economists expect retail inflation could remain around 4.5pc this year, above the central bank's target, delaying the cut in policy rates.

"We see the RBI's Monetary Policy Committee embarking on its first rate cut in the second quarter of fiscal 2025," said Garima Kapoor, an economist at Elara Capital.