New Delhi: Country's retail inflation felt sharply to 4.59 per cent in the month of December 2020, mainly due to decline in food prices. The retail inflation, which is based on the Consumer Price Index (CPI), was 6.93 per cent in the month of November. ALSO READ | Budget 2021: Middle Class To Gain From Higher Tax Deductions; Proposals To Be Presented Next Month

Food inflation declined to 3.41 per cent in December in 2020, compared to 9.5 per cent in the previous month, according to the data released by the Ministry of Statistics and Programme Implementation.

The Reserve Bank of India (RBI) factors in retail inflation while arriving at its monetary policy.

The Consumer Food Price Index (CFPI) or the inflation in the food basket for last month came in at 3.41 per cent, down from 9.50 per cent in November 2020. As per reports, 3.41 per cent growth was due to the decline in vegetable prices which slipped -10.41 per cent on-year rise in December.

However, prices of all other segments apart from vegetables saw rise in the month of December. The oils and fats witnessed a hike of 20.05 per cent, while eggs prices jumped by 16.08 per cent. Pulses and products prices went up by 15.98 per cent. The meat and fish segment also increased by 15.21 per cent.

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Apart from this, India's factory output, measured in terms of Index of Industrial Production (IIP), contracted to 1.9 per cent in November 2020, MoSPI informed on Tuesday.

The provisional rural CPI in December 2020 was recorded at 4.07 per cent, down from 7.20 per cent in the previous month. The urban CPI was 5.19 per cent last month, compared with 5.19 per cent in November 2020.

The ease in retail inflation for the second consecutive month is a major development as experts believe that it may give an impetus for a rate cut in the next meeting of the Reserve Bank of India's Monetary Policy Committee.