Kolkata, Jan 13 (UNI): The Consumer Price Index (CPI) inflation fell to a 12-month low of 5.72% in December 22, along expected lines, primarily due to huge decline in vegetable prices with sowing practices by farmers undergoing a tectonic shift, aligning with better weather and technology forecasting, according to Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India.
The vegetable CPI sub-index fell by 15.08% almost double the rate seen in previous month. The movement in vegetable prices in December mirrors the pattern seen in the previous month which has pulled the overall CPI inflation down to a new low in December.
All other sub-components of the Food and Beverages maintained a similar trend as seen in previous month. The gap between rural and urban CPI however increased to 66 bps in Dec’22 as compared to only 1 bps in May’22.
The rural CPI increased by 6.1 per cent in Dec’22 as compared to 5.4 per cent increase in Urban CPI. Large and persistent divergence between rural and urban inflation could result in differences in real wage rates, real interest rates and inflation expectations which can pose challenges for monetary policy.
” After the lower CPI inflation for Dec’22, we have revised down our estimates for the remaining months of this fiscal. We believe CPI inflation will remain below 6 per cent going forward. Inflation will decline materially and coming down to 5 per cent by Mar’23. For Q1 FY24 we expect average CPI of 4.7 per cent . Against the evolving landscape, we see little incentive for further rate hike, with synchronized past actions on rate front yet to show the full impact. The next policy statement is due on Feb 6-8 and just comes after the Union budget on Feb 1 and also after the FOMC policy statement on Jan 31-1, first in 2023, giving impetus to data driven stance, ” Ghosh said.
