Retail inflation dips further to 2.05% in January, lowest in 19 months

Reserve Bank of India head office in Mumbai | Punit Paranjpe  AFP  Getty Images

Head of Inflation Mike Hardie said: "The fall in inflation is due mainly to cheaper gas, electricity and petrol, partly offset by rising ferry ticket prices and air fares falling more slowly than this time last year".

The consumer price inflation (CPI) for the month of January further declined to 2.05 per cent on the back of drop in food prices and smaller increases in fuel costs.

Inflation peaked at a five-year high of 3.1% in November 2017, above the level of pay growth for British workers, although it has gradually fallen. Consumer inflation - determined by Consumer Price Index (CPI) - indicates the rate of increase in consumer prices.

Industrial production grew 2.4% in December as compared to 7.3% in the corresponding period in 2017-'18, according to the data released by Ministry of Statistics and Programme Implementation on Tuesday.

In a surprise move on February 7, the Reserve Bank of India's Monetary Policy Committee (MPC) cut the benchmark repo rate 25 basis points to 6.25 percent, in its first cut in 18 months, and hinted of more room to cut rates. Consumer inflation in December was revised downwards to 2.11 per cent from 2.19 per cent, according to the official statement. Cumulatively, for April-December 2018-19, industrial output grew at 4.6 per cent against 3.7 per cent in the same period of the previous financial year.

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British consumers have been pressured by inflation after a slump in sterling of more than 10 percent against the dollar and euro since the Brexit referendum in June 2016.

The core measure - which strips out volatile fuel and food costs - has remained sticky at around 6 percent and is a key reason economists cautioned against more rate cuts after last week's surprise easing.

Mining sector output contracted by 1 per cent in December as against 1.2 per cent growth in December 2017, the data showed.

RBI Governor Shaktikanta Das has downplayed the risk India could soon see higher inflation because of bigger budget spending, and has said the MPC would only look at the headline inflation number and ignore core inflation, which has stayed stubbornly high. Prices in London alone fell for a sixth month running, down 0.6 percent on the year. The figures show rural incomes remain under pressure while consumers benefit from easing inflation. The central bank also changed its policy stance to "neutral" from "calibrated tightening", a shift that allows it to act either way on the key rates.

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