India consumer inflation eases to two-year low in December
Photo Credit: Shah Junaid/VCCircle

India's annual consumer price inflation eased to a lower-than-expected 3.41 percent in December, its lowest level in more than two years, helped by a sharp cooling in food prices, government data showed on Thursday.

Economists surveyed by Reuters had expected annual retail inflation to come in at 3.57 percent last month, compared with 3.63 percent in November.

A. Prasanna, economist, ICICI Securities Primary Dealership Ltd, said: "The downside surprise was led by food articles, although core inflation printed below 5 percent. Overall inflation is on track to print at or below 4.5 percent by March. Accordingly, we expect RBI to deliver the residual 25 basis points rate cut by April.”

"Beyond March, inflation profile looks benign, but there are lots of uncertainties over global commodity prices, impact of goods and services tax, pace of economic recovery, all of which could pose some upside risks to inflation."

Tushar Arora, senior economist, HDFC Bank, said: "The moderation in retail inflation is in line with our expectations. Today's reading should give comfort to the RBI to cut policy rates further and help speed up the economic recovery in 2017."

Puneet Pal, head of fixed income, BNP Paribas Mutual Fund, said: "The key risks to inflation is primarily the commodity prices especially oil prices. Apart from that I don't expect much risks with food prices expected to remain on the lower side. The RBI will focus both on inflation and growth and I expect a 25 bps rate cut, however I am not sure whether it will happen in February or April."

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