Inflation Eases in India, Poses Challenge for Policymakers
Inflation in India has shown a slight easing at the start of 2024, presenting a continuing challenge for monetary policymakers in the country. The consumer price index in India rose by 5.10% year-on-year in January, indicating a decline from December’s 5.69% and hitting a three-month low. However, economists had expected inflation to ease further to 5.0%.
The drop in inflation was primarily driven by lower food prices, which saw a rise of 7.6%, down from over 9% in December. Additionally, fuel prices experienced a year-on-year decrease, with deflation at 0.6%. Although the overall inflation rate remains within the target range of 2%-6%, it is still above the Indian central bank’s desired “4% on a durable basis”.
The Reserve Bank of India maintained its policy rate at 6.50% last week, with the Governor highlighting the generally downward trajectory of inflation. The bank predicts an average price increase of 4.5% in the fiscal year commencing in April. However, the current inflation levels signify a persistent challenge for policymakers as they strive to strike an optimal balance in the country’s economy.
Analyst comment
The news is neutral. Inflation in India has eased slightly, which presents a challenge for policymakers. The market is likely to remain cautious as the inflation levels pose a persistent challenge for policymakers in maintaining an optimal balance in the country’s economy.
