India's retail inflation moved up marginally to 5 per cent in December as prices of some food items, including fruits and vegetables, increased. In November, retail inflation based on the Consumer Price Index (CPI) was at 4.38 per cent - the lowest level since government started computing the new series of data in January 2012.
In December 2013, retail inflation was at 9.87 per cent. Despite surge in retail inflation, analysts expect that RBI may ease interest rate in its February monetary policy review. RBI is scheduled to announce its sixth bi-monthly monetary policy on February 3.
Food inflation rose to 4.78 per cent in December 2014, from 3.14 per cent in previous month, showed the official data. Retail prices of vegetables increased by 0.58 per cent as against a decline of 10.9 per cent in November. Fruits were costlier by 14.84 per cent, while the rate of price rise for the same was at 13.74 per cent in previous month.
Category under food and beverages witnessed a rise of 5 per cent in December, over 3.5 per cent in previous month. Inflation in protein-rich items was down at 5.24 per cent in December, from 6.48 per cent in the previous month. Also, prices of oil and fats declined by 1.24 per cent in December over a decline of 0.83 per cent in November.
"We also have a view that the February policy (of RBI) could see a rate cut. But, I would put a caveat that out of all the pre-conditions that the RBI governor laid down in the last policy ... but I am more concerned about how the budget 2015-16 is going to look like.But purely on inflation argument, I would say that the time has come for a rate cut," said Samiran Chakraborty, Head of Research, StanChart Bank.