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Retail inflation
Why is it in the news?
- According to the official data released, CPI inflation scaled an over 5-year peak of 7.35% in December.
More in the news
- Retail inflation based on the Consumer Price Index was only 2.11% in December 2018 and 5.54% in November 2019.
- Cause: The spike was caused by food prices, which account for almost 40% of the typical Indian household’s budget, and grew at 14% in the month of December.
- Major Contributors:
(1) The hike in inflation in the vegetables category was at 60.5% last month in comparison to December 2018.
(2) Onion prices were above the ₹100 per kg mark in many major cities due to a 26% fall in production.
(3) Overall, food inflation rose to 14.12% in December as against a negative rate of -2.65% in the same month of the previous year.
- Consequence:
(1) It will pose a political and economic challenge to the government.
(2) The inflation surge could spoil chances of a repo rate cut in February, even as economic growth is estimated to hit an 11-year low of 5% in FY20.
(3) This is bound to dampen economic sentiment.
Source
The Hindu.