Inflationary pressure in January 2023 was witnessed across non-food categories as well Says Mr. Vivek Rathi, Knight Frank India
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Perspective on CPI numbers By Mr. Vivek Rathi, Director-Research, Knight Frank India
“After softening to sub 6% for two consecutive months, headline inflation in India inched back to 6.5% in Jan 2023 which can get concerning for the RBI. The spike in Jan 2023 headline inflation was led by surge in food prices, primarily cereals. Inflationary pressure in Jan 2023 was witnessed across non-food categories as well.
Prices rise in categories such as clothing & footwear, fuel, etc. has consistently remained high. Similarly, inflation across core categories as well, continues to remain sticky at 6%. This, overall increase in prices has caused shrinkage in disposable incomes of the households which could impact their purchasing capacity. Lenders may also take an adverse view of the loan repayment capacity of borrowers.
So far in FY23, inflation has averaged at 6.8%, 200bps higher than the 5-year average witnessed between FY17-22. In response to high inflation, the RBI has hiked the repo rate by 250bps to 6.5% in FY23.
In the coming months, revival in service sector which could potentially boost demand would further add to inflationary pressure, especially in the core categories. As inflationary pressure continues to sustain, in our view, the RBI is unlikely to stop its rate hike cycle any time soon. We expect the moderate pace of repo rate hike to continue for the next few MPC meetings in FY24.”
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