Retail inflation marginally eases to 5.72% in December, IIP grows over 7% in November

Retail inflation remained below the Reserve Bank of India’s upper tolerance level of 6 per cent for the second consecutive month in December.

The decline in inflation rate is not only good news for consumers, but also for domestic stock market investors who have been eagerly waiting for a favourable outcome.

Data released by the National Statistical Office (NSO) on Thursday indicated that the consumer price index-based inflation eased marginally to 5.72 per cent in December, compared to 5.88 per cent in November.

The marginal dip in inflation was driven by lower food prices, especially vegetables. It may be noted that food inflation for December came in at 4.1 per cent, compared to 4,.67 per cent in November. The inflation rate for vegetables saw the biggest contraction at 15.08 per cent. Inflation rate for fuel and light, however, increased mildly to 10.97 per cent against 10.62 per cent in November.

The latest inflation data will provide comfort to the RBI, which hiked interest rates by 225 bps in five tranches since May to contain inflation. Economists had earlier indicated that inflation in December would remain steady as moderation in food price rises was offset by higher core inflation.

Despite easing inflation, the RBI is likely to maintain its hawkish stance in the near term as it continues to keep a close watch on inflation.

Meanwhile, the Index of Industrial Production (IIP) grew 7.1 per cent year-on-year in November, compared to a contraction of 4 per cent in October, according to the government data.