India's retail inflation rises to 4-month high of 5.69%

The Indian government released the consumer price index data for the month of December on January 12. The consumer inflation rose to a four-month high of 5.69% according to the data published by the Ministry of Statistics and Programme Implementation.

The inflation level continues to remain within the Reserve Bank of India's tolerance range of 2-6%.

The Consumer Price Index or CPI measures retail inflation by examining the changes in prices of most common consumer goods and services. CPI is calculated for a fixed list of items including food, housing, apparel, electronics, and medical care.

According to a poll by CNBC-TV18, CPI in December was projected at 5.9% against 5.55% in the preceding month. The retail inflation stood at 5.55% in November against 4.87% in the preceding month.

Food inflation rose on a year-on-year basis. On the other hand, the core inflation eased to 3.77%, led by a seasonal sequential contraction in housing. According to Madhavi Arora of Emkay Global, the inflation downtrend will be more visible in the fourth quarter, averaging 5.1%, while core could be sub 3.75%.

"We see FY25E headline inflation at near 5.2%* (FY24E:5.37%) , while *core would average much lower -- near 4%*, after ~4.42% in FY24E. That said, we don’t see any action by the RBI, and it is unlikely to precede the Fed in any policy reversal," Arora said.