Retail inflation fell sharply in December, led by a crash in vegetable prices.
Consumer Price Index inflation stood at 4.59% in December 2020 compared to 6.93% in November 2020, according to data released by the Ministry of Statistics and Program Implementation on Tuesday.
At the current level, inflation is back within the Monetary Policy Committee’s target range of 4 (+/-2)% for the first time since March 2020. Inflation in December was at its lowest in 15 months. Inflation in food and beverages dropped to 16-month low of 3.87% in December, compared to a 8.76% in November. Vegetable inflation turned negative at 10.41% in December compared to an increase of 15.63% in November.
Core inflation also eased to 5.34% in December 2020 compared to 5.56% in November.
A Bloomberg poll of 27 economists had estimated inflation at 5% for December 2020.
Apart from the sharp fall in vegetable prices, inflation in other categories such as cereals and pulses also fell.
- Inflation in cereals and products fell to 0.98% from 2.32% in November 2020.
- Inflation in the pulses category was at 15.98% compared to 17.91% last month.
- Clothing and footwear inflation was at 3.49% compared to 3.3% in the previous month.
- Housing inflation stood at 3.21% against a rise of 3.19% last month.
- Fuel and light inflation stood at 2.99% compared to 1.9% earlier.
- Inflation in household goods and services remained steady at 2.95% compared to 2.96% in the previous month.
- Health inflation was at 5.98% compared to 5.54% last month.
- Inflation in personal care and effects was at 11.68% in December compared to 11.97% in November 2020.
The drop in inflation may persist in January and give way to a base effect led uptrend in the first half of next fiscal, said Aditi Nayar, principal economist at ICRA.