Consumer Price Index (CPI) inflation dropped to 2.05 per cent in January, the lowest level since June 2017, government data showed on Monday.
Consumer Price Index (CPI) inflation eased to 2.05 per cent in January, the lowest level since June 2017, government data showed on Monday. The CPI inflation was recorded at 2.19 percent in December 2018. On the other hand, factory output or Index of Industrial Production (IIP) rose to 2.4 per cent in December as against just 0.5 per cent growth rate in November.
A Reuters poll of 30 economists predicted consumer price inflation (CPI) to have accelerated to 2.48 percent in January, from 2.19 percent in December.
The data released by the Central Statistics Office further said the inflation in the ‘fuel and light’ category also fell to 2.2 per cent in January this year from 4.54 per cent in December 2018.
“Both retail inflation and industrial production data released today came below our expectations. Yet, while inflation continued to slide, industrial production recorded acceleration over the last data release. Going by seasonality and past trends, inflation seem to be bottoming out and likely to rise, especially post February. While the subdued food prices are unlikely to continue, house rent and fuel inflation rates are posed to deceleration, suggesting modest rise in inflation in H1CY19,” said Sujan Hajra, Chief Economist, Anand Rathi Financial Services.
The industrial production may improve in the next couple of months, he added.
“Yet, given the current relatively low growth and inflation scenario coupled with high real interest rate situation, we expect the RBI to cut the policy rate by another 25 bps during the next policy meet. The data releases today are modestly positive for both the equity and debt market,” he also said.
Meanwhile, the RBI set an inflation target of 2.8 per cent for Q4 of the current financial year. In its latest policy statement, it projected retail inflation at 3.2-3.4 per cent in the first half of next fiscal year, beginning April 1. For Q3 of 2019-20, the inflation target is set by the RBI at 3.9 per cent.