CPI inflation rate falls again, declines to one-year low of 5.72% in December 2022

Consumer Price Index: The end of 2022 brought in some relief as the rate of inflation came down to a year-low of 5.72 per cent in December, shows the data released by The Ministry Of Statistics And Programme Implementation on Thursday.

Inflation was one of the major factors that affected the Indian economy this year. The country's retail inflation measured by the Consumer Price Index (CPI), continued to be above 6 per cent (the upper bound of the rate) from January 2022 till November. The rate has come in lower than the upper bound of the Reserve Bank of India's (RBI) 2-6 percent mandate. After repeated rate hikes by the Reserve Bank of India (RBI) the inflation rate dropped below 6 per cent for the first time in November 2022.

Several economists and analysts suggested that RBI's move would eventually lead to a lowering of inflation. Despite some easing in the rate in November, RBI governor Shaktikanta Das asserted the fact after the last monetary policy meeting that the phase of inflation is not over yet. In the last financial report, RBI also stated that the rate hike will continue for the next one year.

Concern grew as the RBI failed to bring down the inflation rate despite repeated rate hikes. The accepted rate of inflation is supposed to be at 6 per cent, but the limit was breached in January and spiked to 7.79 per cent in April. 

"If lower international oil prices are percolated into retail prices as well sometime in FY24, this would be an advantage to inflation data. On the RBI front, this reading would provide some comfort. However, we expect RBI would be watchful of the persistence in the stickiness of the core. We expect another 25bps hike in the current cycle before a pause," added Dipanwita Mazumdar, economist, Bank of Baroda.