India’s Retail Inflation Rises to Three-Month High of 1.33% in December

India’s retail inflation rate has risen to a three-month low of 1.33% in December, based on figures published by the Ministry of Statistics on Monday. In December, food costs fell 2.71% annually, moderating from a steeper drop of 3.91% in November. A major factor in the increase in headline inflation overall was the moderating of food inflation.

The pace of price declines for vegetables slowed, even if they kept falling. In December, prices fell 18.47% year over year, as opposed to a bigger 22.20% decline in November.

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The increase in retail inflation to 1.33% does not immediately result in higher household expenditures. Food costs, particularly for vegetables, are still significantly lower than a year ago and price rises are continuing at a snail’s pace. This helps to maintain the pressure on household finances.

For the fourth month in a row, December’s retail sales remained below the Reserve Bank of India’s lower tolerance level. The government has ordered the central bank to maintain inflation at 4% with a 2% margin on each side.

In November, inflation was 0.71%. In September, the previous high was 1.44 percent. The food inflation, which is based on the Consumer Price Index (CPI), was still negative at (-) 2.71 percent, albeit higher than November’s (-) 3.91 percent. This is the seventh straight month that food inflation has been negative.