Food Prices Push India’s Inflation to 4-Month High of 5.69% in December

New Delhi: India’s retail inflation inched up to 5.69% in December 2023, marginally exceeding the 5.5% recorded in the previous month, data released by the Ministry of Statistics & Programme Implementation revealed on Friday. Despite the slight increase, inflation remains within the Reserve Bank of India’s (RBI) target range of 2-6%.

Notably, the latest data shows a sequential contraction of 0.32% in the inflation rate compared to November. However, a cause for concern lies in the persistent high food inflation, which stood at 9.53% in December. This underscores the RBI Governor Shaktikanta Das’ earlier concerns about the influence of food prices on the overall inflation outlook, particularly in the context of upcoming general elections.

The inflation rates in rural and urban areas also diverged slightly, with rural areas experiencing a higher rate of 5.93% compared to 5.46% in urban areas. Both figures, however, represent an increase from the corresponding rates of 5.85% and 5.26% recorded in December 2022.

December witnessed a significant rise in vegetable inflation, jumping to 27.64% from 17.7% in November. This spike contrasted with the continued contraction in fuel and light inflation, which stood at -0.99% compared to -0.77% in the previous month.

The RBI maintained its inflation target of 5.4% during its December policy meeting, having revised its FY24 inflation forecast to 5.4% from 5.1% in August. Governor Das emphasized the success of disinflationary measures but stressed the need for close monitoring of the food inflation trajectory. While reiterating the RBI’s commitment to achieving a 4% inflation target in the medium term, he acknowledged the susceptibility of headline inflation to external and domestic shocks.