Inflation is a thorn in the side for policymakers, but it will be a relief to see some relief in price pressures at the end of the year.
India’s consumer price index rose 5.2% year-on-year in December, slower than the 5.5% rise in November, government data released on Monday showed.
The amount of printing in December was the lowest in four months.
It remains above the Reserve Bank of India’s (RBI) core target of 4%, but hopes are rising that further economic cooling could create room for monetary easing.
Food prices soared during last year’s monsoon season due to uneven rainfall, but they are starting to calm down as supplies gradually normalize. India’s food inflation rate fell to 8.4% in December from 9% in November.
Also read: Mint Primer | All about the inflation surge: how, why and when
This should help reduce overall price pressure, unless the economy’s soft demand suddenly starts to reverse.
With both private consumption and investment unsatisfactory, it may become increasingly difficult for the RBI to focus solely on price stability.
But what we should expect to foster growth is fiscal effort. Next month’s budget will be closely watched regarding these matters.
And if that spending does not cause inflation, it will be much easier for the RBI to lower lending rates.
