Retail inflation cools further to 2.05% in January on easing food prices

Figures released separately on Tuesday showed industrial output growth rose 2.4 percent in December on the year.

India's retail inflation rate dropped to 2.05 percent in January from a year earlier, lowest since June 2017, government data showed on Tuesday.

Retail inflation for December 2018 has also been revised downward to 2.11 percent from the earlier estimate of 2.19 percent.

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. Economists had on an average expected inflation at 2.48 per cent in January, according to a poll of 30 economists surveyed by news agency Reuters before the last RBI policy meeting.

The CPI including owner-occupiers' housing costs (CPIH) - the ONS's preferred measure of inflation - was 1.8 per cent in January, down from 2 per cent in December.

Prime Minister Narendra Modi, who faces tough general elections by May, has announced an annual transfer of 750 billion rupees ($11 billion) to millions of farmers, and tax benefits for the middle class, which many economists say could spur both consumer spending and inflation.

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".

Prices of vegetables stood at (-) 13.3 percent versus (-) 16.14 percent a month ago while pulses contracted (-) 5.5 percent in January from (-) 7.13 percent a month ago. Consumer-price growth reached 2.05 percent in January, well below the Reserve Bank of India's medium term target of 4 percent.

The latest fall in inflation marks the end of the cost of living outstripping the Bank of England's 2% target for CPI, which is set by the government.

Inflation was dragged down by lower energy and fuel prices. However, the conundrum of sharp spikes in rural health and education prices still remains and requires watching. "Our expectations for the next few months are also very benign on headline CPI and hence we believe that there is room for further accommodation in the next policy meeting".

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