Consumer Price Index (CPI) for December 2019

Higher CPI amidst low growth rate to put RBI's MPC in a dilemma.

India's Consumer Price Index for December 2019 grew by 7.2% YoY, driven by high food price, breaching the RBI's upper tolerance limit of 6%.The growth rate in core CPI (ex-food & fuel) has moderately increased to 3.7% YoY from 3.6% YoY in October 2019.

Among the food products, the price rise is majorly in vegetables, pulses, and dairy products both in rural and urban India.

There is not much respite in the seasonally adjusted CPI either, as the index has been accelerating since January 2019. Even if the food prices shock subsides in the coming months, the oil shocks due to uncertain geopolitical risks in the middle east would add to uncertainty in inflation.

Thus, the rising food prices led by the supply shortfalls in various sectors, as witnessed in slowdown in major economic indicators in the last few months, is likely to leave the RBI's MPC in a dilemma in its upcoming policy meeting in February.