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Experts react as retail inflation hits 17-month high in January

An accountant works next to the stacked sacks of garlic at a wholesale vegetable market in Chandigarh, January 14, 2016. REUTERS/Ajay Verma/Files

MUMBAI (Reuters) - India's annual consumer price inflation edged up to a 17-month high of 5.69 percent in January, driven up by higher food costs, government data showed on Friday. Meanwhile, separate data showed India's industrial output contracted an annual 1.3 percent in December. COMMENTARY A. PRASANNA, ECONOMIST, ICICI PRIMARY DEALERSHIP LTD, MUMBAI: "The number has surprised us on the upside mainly due to higher food and housing rentals. Within food, prices of pulses continue to hold at elevated levels while prices of other protein items also went up. "The elevated inflation in key food items despite the decline in global food prices over the last two years suggests structural mismatches and poor policy choices in India." "After some early gains, the government has been unable to address some of these issues. Overall the no does not change our view of a residual 25 bps repo rate cut in the April policy." RUPA REGE NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCE HOLDINGS "On y/y basis, higher prices of wheat, pulses and edible oil, plus sticky prices of health, education, housing services, combined with higher service tax rate have been keeping CPI inflation elevated." "All leading indicators had suggested that IIP will remain in contracting zone, because we had witnessed sluggish growth in core industrial output, the impact of Chennai flood on manufacturing output, weak global demand impacting our exports and fall in vehicle sales across categories." DHARMAKIRTI JOSHI, CHIEF ECONOMIST, CRISIL "CPI numbers are as expected. I think this is now going to peak out and should remain in RBI's comfort zone through this year, helping RBI achieve next year's target levels as well." N. S. VENKATESH, CHAIRMAN, FIMMDA "I believe CPI is still under glided path of RBI, some aberration of cereal, vegetable prices has resulted in this spike, but it is still very much in control. "Inflation targeting measures are taking effect, should give more comfort for RBI to target next year's target. RADHIKA RAO, ECONOMIST, GROUP RESEARCH, RBS "Despite the modest upside surprise in January's CPI reading, readings are trending below the central bank's target of 6 percent for this quarter. Base effects have limited the year-on-year pullback in food prices, but pressures are waning on sequential terms. Today's outcome reinforces the central bank's cautious outlook at the recent policy review. While the RBI remains confident that inflation will stay manageable this year, the upcoming public sector wage bill and pension scheme could disrupt the disinflationary phase in FY16/17." (Reporting by Manoj Rawal and Neha Dasgupta; Editing by Anupama Dwivedi)