India’s retail inflation eased to 4.59 per cent in the month of December, according to the government data. The country’s retail inflation is being measured by the Consumer Price Index (CPI). Separately, India’s factory output, measured in terms of Index of Industrial Production (IIP), witnessed a contraction of -1.9 per cent in November. Also Read - Union Budget 2021 to be Presented on February 1, Budget Session of Parliament from January 29

The Ministry of Statistics and Programme Implementation on Tuesday released two separate data. The retail inflation for the month of November was 6.93 per cent. Also Read - India November Retail inflation At 6.93 Percent Versus 7.61 Percent in October

The numbers also mark the lowest inflation print since November 2019, giving some relief to the RBI. Also Read - Rolls-Royce, Infosys Ink Partnership For Aerospace Engineering in India

The December CPI data has come within the Reserve Bank of India’s (RBI) upper margin of 6 per cent. The government has mandated the central bank to keep retail inflation within the range of 4 per cent with a margin of 2 per cent on either side.

Last month, the Reserve Bank of India (RBI) issued a working paper on measuring trend inflation in India, authored by Harendra Kumar Behera and Deputy Governor Michael Debabrata Patra.

Released ahead of the review of the inflation target in March 2021, the paper argued that maintaining the inflation target at 4% is appropriate for India. As per the current mandate, RBI is required to maintain inflation at 4% with a lower tolerance of 2% and an upper limit of 6%.

“The paper finds a steady decline in trend inflation to 4.1 to 4.3% since 2014. A target set too below the trend imparts a deflationary bias to monetary policy because it will go into overkill relative to what the economy can intrinsically bear in order to achieve the target. Analogously, a target that is fixed above-trend renders monetary policy too expansionary and prone to inflationary shocks and unanchored expectation,” read the paper.