Inflation turns negative at (-)0.39% in January, food prices remain a concern

Inflation declined to a five and a half year low of (-)0.39% in January on falling prices of manufactured and fuel items even though food articles remained high.

Inflation measured on wholesale price index (WPI) was at 0.11% in December. The data for November was revised downwards to a negative (-)0.17%, from the provisional estimate of zero.

However, food inflation witnessed a rising trend in January and scaled to a six month high of 8%, as per the government data.

Inflation in pulses, vegetables and cereals was higher in January over the previous month.

On the other hand, the rate of price rise in potato, milk, rice and protein rich items like egg, meat and fish was slower in the month under review.

Inflation in 'fuel and power segment' was negative at (-)10.69%, while in manufactured products it was 1.05%.

The data further showed that the contraction in WPI inflation for petrol was steeper at 17.08% in January from 11.96% in December. Similarly the rate of decline in diesel prices last month was higher than in the previous month.

The inflation in the primary articles segment inched up to 3.27% in January, as against 2.17% in December.

The last time the inflation had touched this low level was in June 2009 when it was at (-)0.4%.

RBI Governor Raghuram Rajan, in the monetary policy review earlier this month, kept key interest rate unchanged saying the apex bank wanted more comfort on inflation front as it awaited cues from Finance Minister Arun Jaitley's first full year Budget.

Rajan said retail inflation was likely to be around the target level of 6% by January 2016 but flagged monsoon and oil prices as upside risks.

As per data, retail inflation moved up to 5.11% in January month-on-month, measured on a new base year 2012, mainly due to dearer food items including fruits and vegetables.