Consumer price inflation in India jumped to 7.35% in December of 2019 from 5.54% in November and well above market expectations of 6.2%. The inflation accelerated for the fifth straight month, remaining the highest rate since July of 2016. Main upward pressure came from cost of food and beverages (12.16%), namely cereals (4.36%), milk (4.22%), vegetables (60.5%), fruits (4.55%) and pulses (15.44%). The food alone rate jumped to 14.12%, the highest since November of 2013. Other increases were also seen for miscellaneous (4.09%), fuel and light (0.7%), clothing and footwear (1.5%), housing (4.3%) and pan, tobacco and intoxicants (3.4%). On a monthly basis, consumer prices went up 1.2%, the highest rate since July of 2017. The Reserve Bank of India's targets inflation at 4%. The recent spike in inflation lowered chances of another rate cut in February. Inflation Rate in India averaged 5.99 percent from 2012 until 2019, reaching an all time high of 12.17 percent in November of 2013 and a record low of 1.54 percent in June of 2017. source: Ministry of Statistics and Programme Implementation (MOSPI)
Inflation Rate in India is expected to be 5.70 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate Inflation Rate in India to stand at 5.20 in 12 months time. In the long-term, the India Inflation Rate is projected to trend around 4.50 percent in 2020, according to our econometric models.
India Inflation Rate
In 2013, the consumer price index replaced the wholesale price index (WPI) as a main measure of inflation. In India, the most important category in the consumer price index is Food and beverages (45.86 percent of total weight), of which Cereals and products (9.67 percent), Milk and products (6.61 percent), Vegetables (6.04 percent), Prepared meals, snacks, sweets, etc. (5.55 percent), Meat and fish (3.61 percent), and Oils and fats (3.56 percent). Miscellaneous accounts for 28.32 percent, of which Transport and communication (8.59 percent), health (5.89 percent), and education (4.46 percent). Housing accounts for 10.07 percent; Fuel and light for 6.84 percent; Clothing and footwear for 6.53 percent; and Pan, tobacco and intoxicants for 2.38 percent. Consumer price changes in India can be very volatile due to dependence on energy imports, the uncertain impact of monsoon rains on its large farm sector, difficulties transporting food items to market because of its poor roads and infrastructure and high fiscal deficit.