India's retail inflation in February at 6.44%

14 Mar 2023 , 08:34 AM

India’s retail inflation decreased marginally to 6.44% year-on-year in February as against 6.52% in January, statistics issued by the Ministry of Statistics and Program Implementation showed on Monday.

Inflation dropped by 0.17% sequentially. For the second consecutive month, the inflation rate has been above the Central Bank of India’s (RBI) tolerance range of 2–6%.

Rising food prices, which make up roughly 40% of the Consumer Price Index (CPI) basket, are to blame for the high inflation rate. Food price inflation was 5.95% in February.

Compared to the previous month, the inflation rate for vegetables slightly decreased to 11.6% from 11.7%.  Inflation rate for fuel and lighting dropped from 10.84% in January to 9.90%.

Since supply-side disruptions in the post-pandemic globe that was merely in the early stages of recovering from economic shocks exacerbated by the unpredictable nature of the Russia-Ukraine war, higher inflation has been a concern for central banks around the world, including India.

The RBI is anticipated to keep inflation within a 2–6% range. To stop inflation, it has been boosting lending rates. The policy repo rate had already received a quarter-point increase from the RBI in February.

Although the worst of the pricing pressures were believed to be behind us, the RBI reduced India’s inflation prediction for this fiscal year; nonetheless, Governor Shaktikanta Das raised concerns about the stickiness of core inflation at the Monetary Policy Committee meeting on February 8.

The central bank will likely raise rates as a result of the growing inflation rates. According to a Bloomberg article, another rate increase by the RBI may push borrowing prices to a seven-year high.

Retail inflation was predicted by the RBI to be 6.5% for FY23 and 5.7% for Q4. Retail inflation is anticipated to be 5.3% in FY24, with Q1 and Q2 readings of 5%, 5.4%, 5.6%, and 5.8%, respectively.

The RBI has raised the short-term lending rate by 225 basis points since May of last year in an effort to keep inflation under control.

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