India`s retail inflation eased to 4.59% in December from a year ago, mainly helped by a sharp fall in vegetable prices, government data released on Tuesday showed, falling within the central bank`s target of 2%-6% after eight months.

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Analysts in a Reuters poll had predicted an annual inflation at 5.28% for the month.

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COMMENTARY

GARIMA KAPOOR, ECONOMIST - INSTITUTIONAL EQUITIES, ELARA CAPITAL, MUMBAI

"The sharp fall in December CPI inflation is in line with our estimate of 4.5%. It is led by a slump in food prices amid robust Kharif crop arrival and continued normalisation of supply chains."

"Notwithstanding the current softening in headline CPI, we believe CPI inflation in FY22 is likely to average 5%. With policy normalisation expected to gain momentum by Q1FY22, we expect the MPC (Monetary Policy Committee) to change the monetary policy stance in H2FY22 and anticipate one rate hike of 25 bps in Q4FY22, assuming no change in monetary policy framework."

SUJAN HAJRA, CHIEF ECONOMIST, ANAND RATHI SECURITIES, MUMBAI

"The major takeaway from the numbers is that there were worries over liquidity tightening due to higher inflation. The RBI (Reserve Bank of India) was under tremendous pressure to think about liquidity withdrawal.

hat pressure will ease on the RBI and this is pretty positive for both the bond and equity markets. The immediate thing is that there won`t be any talk of liquidity withdrawal and the talk of rate hike goes off the table. If the inflation falls below 4% and remains so for a couple of months, then the possibility of a rate-cut cannot be ruled out."