Retail inflation drops to 4.59 pc in Dec: Govt data

While the prices of ‘oils and fats’ have gone up by 20 per cent last December in comparison to a year ago period, there was not much of a change in the price of sugar.

New Delhi: Retail inflation fell sharply to a 14-month low of 4.59 per cent in last December, mainly due to declining food prices, government data showed on Tuesday.

Retail inflation based on the Consumer Price Index (CPI) was 6.93 per cent in last November.

Most importantly, food inflation declined to 3.41 per cent in December 2020, compared to 9.5 per cent in November, as per the data released by the Ministry of Statistics and Programme Implementation.

Surge in prices of oil, egg, pulses

As per the data, while the prices of ‘oils and fats’ have gone up by 20 per cent in last December in comparison to a year ago period, there was not much change in the price of sugar.

Besides ‘oils and fats’, food items that have recorded over 10 per cent inflation were – egg (16.08 per cent), pulses and products (15.98 per cent), meat and fish (15.21 per cent), non-alcoholic beverages (11.86 per cent) and spices (10.29 per cent).

In the non-food item category, the prices of pan and tobacco products have gone up by 10.74 per cent in last December.

Chhattisgarh tops the inflation table

Among all the 21 States/Union Territories for which the data is collected, retail prices in Chhattisgarh have gone up the most at 7.20 per cent, while the price rise was the least in the national capital.

Next to Chhattisgarh, the retail inflation was highest in Andhra Pradesh (7.20 per cent), followed by, Telangana (6.47 per cent) and West Bengal (5.96 per cent).

What is the significance of CPI?

The Reserve Bank of India (RBI) takes into account the CPI numbers while revising the Repo Rate at an interval of every two-months.

The Repo Rate is the interest rate at which the RBI lends money to commercial banks, which, in turn, decides banks’ lending rate to customers.

As per the current policy, the mandate of the Monetary Policy Committee of the RBI is to maintain the CPI between 2 and 6 per cent.

Depending on the CPI figures, the RBI either hikes or cuts the Repo Rate to anchor the retail prices with in the stipulated range.