After three consecutive months of decline, headline inflation in India rose sharply in January 2023. In a piece for Mint, Dr Niranjan Rajadhyaksha, Executive Director, Artha Global, opines that India could still be on a path to gradual disinflation.

Excerpts below:

“The inflation data for January has taken almost everyone by surprise. Headline inflation in India peaked in September 2022. It then fell for three months in a row, only to bounce back in the first month of this year, once again outside the formal target given to the Indian central bank. The sticker shock in January may well be a temporary blip because of higher cereal prices, or it could be a lesson in the fact that disinflation is rarely a neatly linear process.”

“The persistence of core inflation near the upper end of the inflation target for nearly three years is surely a worry. The analytical puzzle is why such persistence has not had strong second-round effects of the sort we see in many rich countries, especially in the labour market. This column has listed some possible reasons. That also gives reason to hope that, despite the January inflation surprise, India is still on a gradual path of disinflation.”

Read the full article here.