Consumer price inflation set to see upside pressure: Crisil

Posted February 14, 2017

Consumer prices climbed at a pace of 3.17 percent year-on-year in January.

Consumer price inflation had fallen to a 3-year low of 3.41 per cent in December on the back of a fall in the prices of perishable items like fruits and vegetables, and this has now been extended further as vegetable prices crashed by 15.62 per cent.

Factory gate prices charged by manufacturers are also climbing, with the annual gain likely to be over 3 per cent, economists said.

Howard Archer, chief United Kingdom economist at forecaster IHS Global Insight, said: 'Inflation is expected to have been lifted in January by higher fuel prices and increased food prices'.

Because of the warm weather, vegetable prices remained largely stable last month.

Retail inflation had grown 5.69 percent in January, 2016, indicating a more expansionary economy a year ago.

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India's inflation cooled to its lowest in at least five years in January as food prices fell following the government's cash clampdown, but emerging price pressures mean the Reserve Bank of India (RBI) will probably keep interest rates on hold.

Experts said the non-food components have shown higher price increases.

Housing cost advanced 5.02 percent and fuel and light rose 3.42 percent.

Reserve Bank Of India Governor Urjit Patel had noted on Saturday that "CPI ex-food and fuel has been hard to bring down since September", and it is necessary that this inflation goes down for headline inflation to move towards 4% inflation on a durable basis.

Headline inflation has been under 4 percent since November, well below the RBI's 5 percent target for March and medium-term target of 4 percent. "The focus of Union budget on growth revival without compromising on fiscal prudence should bode well for limiting upside risk for inflation", the monetary policy panel had said.

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