DNA Money Edit: What lower retail inflation means for you

For the new Reserve Bank of India (RBI) governor, who took charge on Wednesday, the drop in retail inflation is a good omen. The consumer price index (CPI)-based inflation is on a steady decline, riding lower food prices and a significant fall in crude oil price. It stood at 2.33% in November, its lowest since June 2017. Rural inflation at 1.71% may be much lower compared to the urban inflation that is currently hovering at 3.12% as the rural consumption basket has a higher weight of food items. 

This may mean good times for consumers but the low food prices may continue to hurt farmers as their income comes under renewed pressure. However, weak post-monsoon rainfall and a lag in rabi sowing have raised concerns on how long food prices would remain in the disinflation zone.

Will the drop in inflation mean lower interest rates any time soon? Despite a fall in inflation, some economists expect a status-quo. The RBI's monetary policy committee (MPC) may look to shift the monetary stance to neutral from the calibrated tightening when it meets in February. In all probability, the central bank will slash the repo rate, if inflationary risks remain in check.

The spurt in Index of Industrial Production (IIP) to an 11-month high of 8.1% in October, thanks to the government-led spending in infrastructure, will also make life easier for the central bank.