Wholesale inflation in India based on the Wholesale Price Index continued to stay moderate and was at 4.73 per cent (provisional) in January 2023, against the previous month’s 4.95 per cent, official data showed on Tuesday.
The index for fuel and power group (with an overall weightage of 13.15 per cent) declined by 1.39 per cent to 155.8 in January, data showed. In October, overall wholesale inflation was at 8.39 and has been falling since then. Notably, the wholesale price index (WPI)-based inflation had been in double digits for 18 months in a row till September.
Meanhwile, retail inflation again breached RBI’s upper tolerance band in the month of January 2023, with the Consumer Price Index at 6.52 per cent, government data released on Monday showed.
The retail inflation in rural and urban India was 6.85 per cent and 6.00 per cent, respectively. Among groups, cereals and products, eggs, spices, among others, contributed to the elevation in retail inflation in January.
India’s retail inflation was above RBI’s six per cent target for three consecutive quarters and had managed to fall back to the RBI’s comfort zone only in November 2022.
Since May last year, the RBI has increased the short-term lending rate by 250 basis points, including the latest 25 bps hike, to tame inflation. Raising repo rate helps in cooling demand in the economy and thus helps in managing inflation.
Under the flexible inflation targeting framework, the RBI is deemed to have failed in managing price rises if the CPI-based inflation is outside the 2-6 per cent range for three quarters in a row.
For the current financial year 2022-23 ending March, retail inflation was projected by RBI at 6.5 per cent, with an average of 5.7 per cent in the January-March 2023 quarter.