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Charts & Analysis

Consumer Inflation for Feb 2015 Not A Worry, Even When Higher Than Last Month at 5.37%

CPI Inflation for Jan 2015 is out and it’s not a worry. Even though it’s marginally up at +5.37%, the increase is because of the dipping base in the previous year – not really as a major increase looking at the flatness of the index in the chart below (dark blue line):

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While element level inflation is lower for everything since August, we do see a rising tide since November. Within control, though:

 

image And yes, it’s more urban than rural, this rise:

image

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Core Inflation Continues to Fall

Remove Food and Fuel and the inflation in the core economy isn’t much. In fact, it’s at its lowest ever, at 3.84%.

image

This is why inflation is not a worry. When your core inflation is not going up, it’s not a fundamental problem> Of course, the fact that food prices are higher is a potential source of worry, and we are sure that if it were to cross 7% the RBI would consider some corrective action or talk to the government. 

The RBI has only just cut rates. So it’s unlikely to cut more just immediately. But as you can see, there’s a lot of room. If inflation remains at this level, we could easily expect further cuts. South Korea suddenly cut rates today.  It’s going to be competitive rate cut season if everyone goes out like this. For India, inflation’s not going to be an issue, unless oil prices create a problem.

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  • Ganesh Nayak says:

    More urban than rural? Either the graph needs to be changed or your statement

  • kumar says:

    agree.
    everything would be under control, if only we did not need to eat food, or stay in one place, without using fuel for moving from one place to another.
    government needs to solve the people [eat and move] problem without affecting its tax base.