India’s inflation flares up, returns to 6% level in January

INDIA’S inflation accelerated in January, breaching the top-end of the central bank’s target for the first time in four months and validating the concern of monetary authorities that price pressures are persistent and must be contained.

The consumer price index rose 6.52 per cent from a year earlier, according to data released by the Statistics Ministry on Monday (Feb 13). That compares with 5.72 per cent in December and 6 per cent median estimate in a Bloomberg survey.

Food prices, which make up nearly half the index, increased 5.94 per cent, while ‘fuel and light’ rose 10.84 per cent. Clothing and footwear costs went up 9.08 per cent and housing prices picked up 4.62 per cent, keeping core prices elevated.

Core inflation, which strips out volatile food and fuel costs, stayed above the 6 per cent mark for the 16th month in a row.

The flare up in price gains puts further Reserve Bank of India (RBI) tightening on the cards, a move that’s anticipated by economists including those from Goldman Sachs and Citigroup India’s central bank last week raised the benchmark rate a sixth time since May to 6.50 per cent and kept the door open for further hikes. RBI will next meet to set the key rate in April.

Authorities “need to see a decisive moderation in inflation,” RBI governor Shaktikanta Das said on Feb 8, with the central bank underscoring the importance of price gains staying within the 2 per cent-6 per cent target band.

RBI last year had to write a report to the Parliament after missing its 2 per cent-6 per cent headline inflation target for three straight quarters last year. BLOOMBERG