Core Inflation

In July, Chief Economic Advisor V Anantha Nageswaran pitched for excluding food inflation from policy formulation which set it a fierce debate in policy circles with RBI resisting any such move

Increase in the nationwide core consumer price index (CPI), which includes oil products but excludes fresh food prices, compared with a median market forecast for a 2.2 per cent gain

With food inflation contributing over 75 per cent to headline inflation in May and June and making up 46 per cent of the CPI basket, vegetable prices accounted for 35 per cent of June's inflation

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Vegetable prices eased in August and brought down retail inflation to 6.8%. This is likely to continue in September, the Reserve Bank of India said in its monthly bulletin

The economy expanded at a 2.6% rate in the fourth quarter

Household goods and services, personal care products still hovering at high levels

Some economists believe that firms are using the excuse of supply disruptions, earlier due to Covid-19 and now the Russia-Ukraine war, to increase prices, calling it 'excuseflation'

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"High core inflation also points to the cost-price nexus in the economy more sharply," Bhide said, adding that stabilizing core prices was necessary for manufacturing firms to expand their capacities

Globally, too, sticky inflation seems to be a cause for concern. Last week, two Federal Reserve (US Fed) officials suggested that the US central bank may need to keep interest rates elevated ahead

Core inflation, that excludes food and fuel prices, remained sticky above the 6% mark

Core inflation, which excludes volatile food and fuel prices, was still running at 6.10% in December, which makes it difficult for the RBI to look away and to keep the tightening cycle going

RBI monetary policy: In December, Das had said that despite consecutive rate hikes, core inflation had continued to remain 'sticky'

S&P Global Ratings on Tuesday said core inflation in India has been declining sequentially, and an elevated 6.25 per cent policy rate limits the need for further rate hikes. The Reserve Bank has increased the short-term lending rate by 225 basis points since May last year to contain inflation, mostly driven by external factors, especially global supply chain disruption, following the Russia-Ukraine war outbreak. The policy rate now stands at 6.25 per cent. The RBI's rate-setting panel - Monetary Policy Committee (MPC) - will decide on the interest rate on Wednesday. "In India, core inflation has been elevated for longer; however, it eased sequentially in the second half of 2022. An already elevated 6.25 per cent policy rate limits the need for further increases," S&P said in a report. The RBI has been tasked to ensure that retail inflation remains at 4 per cent with a margin of 2 per cent. However, external factors have led retail inflation to remain above the upper tolerance .

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Core inflation, calculated after stripping out volatile food and energy prices, has stayed above 6% for 14 months in a row, while retail inflation cooled to 5.88% in November

In terms of food prices, India seems to be doing much better than the Western economies, owing to it being less dependent on imports