By Manoj Kumar
NEW DELHI (Reuters) – India’s annual retail inflation accelerated to 7.35% in December, the highest in more than five years, strengthening views that the central will once again hold its key policy rates unchanged at next month’s review.
The pick-up in inflation rate, mainly driven by rising food prices, adds to the challenges for Prime Minister Narendra Modi, who is trying to revive slowing economic growth amid student protests against a controversial new citizenship law that critics say is discriminatory against Muslims.
Finance Minister Nirmala Sitharaman will present the annual budget for 2020/21 on Feb. 1, and is widely expected to increase spending on infrastructure and cut taxes, which some economists fear could further fuel prices.
The Reserve Bank of India (RBI) will hold its next policy review from Feb. 4 to 6.
Annual retail inflation
Retail inflation had touched 7.39% in July 2014, according to Refinitiv data.
Retail food prices, which make up nearly half of the India’s inflation basket, increased 14.12% in December from a year earlier, against 10.01% in November. Some vegetable prices, including prices of onions that are a staple in Indian cooking, have increased more than four-fold since June.
The RBI cut its policy repo rate
(Reporting by Aftab Ahmed and Manoj Kumar; Editing by Alex Richardson)