New Delhi: India's retail inflation slightly eased in January from a 17-month high in December but remained above the 4 per cent medium-term target of the Reserve Bank of India (RBI) for the third straight month.
India's measure of consumer price inflation, the CPI index, rose 5.07 per cent in January from a year earlier, data released by the Ministry of Statistics showed on Monday.
Analysts polled by Reuters had predicted January's rate would ease to 5.14 per cent from 5.21 per cent in December.
Last week, the RBI held its main repo rate unchanged, for the third straight meeting. The central bank warned that it would closely monitor inflation but also said economic growth needed to be "carefully nurtured."
The central bank's statement was less hawkish than many expected, and prompted some economists to change their predictions of a rate increase in the next few months.
"I do not expect a rate hike for the next five to six months," said Raghvendra Nath, managing director of Ladderup Wealth Management.
He said apart from oil prices, the monsoon rains would be the key factor for inflation.
Consumer food prices rose 4.70 per cent in January, compared with 4.96 per cent in December, as prices of pulses fell 20.19 per cent from a year earlier. Food prices have softened, reflecting eased vegetable costs following stepped-up arrivals in markets of fresh crops.
Fuel and light inflation stood at 7.58 per cent compared with 7.90 per cent in December, while housing inflation stood at 8.33 per cent from 8.25 per cent in the previous month.
The central bank has raised its inflation forecast to 5.1 per cent for the January-March quarter, compared with 4.6 per cent for October-December, citing price pressures from higher import taxes announced in the budget on February 1, pushing up food and fuel prices.
India's retail inflation is seen accelerating, especially after a budget increase in some import taxes and the widening of the fiscal deficit for the year beginning April 1 to finance a sharp rise in spending on rural areas and health-care.
The central bank expects retail inflation to pick up to 5.1-5.6 per cent in April-September before easing, assuming normal rainfall.
It will next review policy on April 5.
Separately, India's annual industrial output grew 7.1 per cent in December, data released on Monday showed, compared with 6.2 per cent forecast in a Reuters poll.
The world's seventh largest economy is expected to grow 6.5 per cent in the fiscal year ending in March, while the International Monetary Fund expects growth will pick up to 7.4 per cent in 2018, and 7.8 per cent in 2019 - driven by a pickup in domestic and global demand.
Expert views on consumer inflation easing to 5.07 per cent:
Devendra Kumar Pant (Chief economist and senior director (PUBLIC finance), India Ratings & Research, New Delhi)
"Food inflation benefited from the decline in vegetable prices, which we generally see during winter.
"Going forward, the main factor will come into play somewhere around June when the government will announce MSP (minimum support prices for crops).
"We are still holding our view of 4.6 percent CPI inflation for the fiscal year 2018/19. However, the impact of MSP is yet to be factored in."
Raghvendra Nath (Managing director, Ladderup Wealth Management, Mumbai)
"I don't think the RBI will change its views since it has already been contemplating an upward revision in inflation in the next half-year.
"Based on their stance, it is unlikely they are going to tinker with rates. Inflation may increase in the coming months due to oil price hike and food inflation not coming down. I do not expect a rate hike for the next five to six months.
"Apart from oil prices, monsoons will be the key factor for inflation. Food inflation has been the biggest culprit but if monsoon turns out well it could keep inflation to moderate levels."
Radhika Rao (Group economist, DBS, Singapore)
"Inflation numbers for January are modestly lower mainly due to moderating food (prices), while higher oil and rent allowance limited a larger correction in price pressures.
"Numbers are along RBI's revised projections, with the next six months to stay firm on arithmetic terms i.e. due to base effects.
"The central bank has already indicated that it will look through near-term prints and today's numbers don't warrant any change in their neutral policy stance.
"Volatility and base effects aside, IIP (industrial output) signals that growth has hit a trough and is on a gradual upmove."
Tushar Arora (Senior economist, HDFC Bank, New Delhi)
"Retail inflation is likely to hover around the 5 percent mark in the January-March quarter. Thereafter, CPI readings could touch 6 percent by the summer.
"Against such a backdrop, it is unlikely that the central bank would consider cutting rates. In fact, if the softening expected in 2H-FY19 does not materialize, the risk would be that of a rate hike somewhere down the line."