Inflation outturns in the last two months have turned out to be better than expected. In January 2021, CPI inflation softened further to near striking distance of the 4.0 per cent target after a gap of 15 months. In contrast, WPI inflation in Jan-21 climbed to the highest level in 11 months essentially on account of hardening of global commodity prices. The urban inflation continues to remain above 5 per cent with 1-year ahead inflation expectations of urban households seeing no respite. For the next fiscal year, Acuité Ratings & Research expects the CPI inflation to average close to 5.0 per cent, a significant moderation versus likely FY21 average of close to 6.0 per cent. Retail inflation may average close to five per cent in next fiscal year, a significant moderation versus likely the current fiscal average of close to six per cent.
