Perspective on the CPI By Dr. M Govinda Rao, Brickwork Ratings
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Below is perspective on the CPI By Dr. M Govinda Rao, Chief Economic Adviser at Brickwork Ratings
“The CPI inflation rate increased to 6.01% in January 2022 from the revised 5.66% in December 2021. The current level of inflation is the highest in the last seven months and also higher than the 4.06% in January 2021. Core inflation moderated to 5.96% from 6.01%.
The prices of food items have shown a steep rise from 4.05% in December to 5.43% in January, due to rising global commodity prices and continued supply bottlenecks. Higher food inflation has accelerated the overall inflation rate, in addition to higher core and fuel inflation which are already at elevated levels.
Rising International crude oil prices remain a huge threat accentuating inflationary pressures. Although the fuel inflation eased in January 2022 (9.32%) compared to December 2021 (10.95%), we expect the pressure on prices likely to remain till there is some respite from the rising international crude oil prices. The ongoing Ukraine crisis is likely to escalate the international crude oil prices higher, hence the central government may have to lower the excise duties in the coming months to control inflation. However, in the next few months, the base effect is likely to reduce the inflation rate because the retail prices had remained elevated during the second wave of the pandemic and the third wave is almost over. On the whole, the price level is likely to remain close to RBI’s projections for Q4.”
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