India’s retail inflation slows to 6.4%

March 14, 2023

India’s retail inflation declined marginally to 6.44 per cent year-on-year in February as against 6.52 per cent in January, data released by the Ministry of Statistics and Programme Implementation showed on Monday.

The sequential inflation declined by 0.17 per cent. The inflation rate has remained above the Reserve Bank of India’s (RBI) tolerance band of 2-6 per cent for the second straight month.

The high inflation level can be attributed to rising food prices, which account for nearly 40 per cent of the Consumer Price Index (CPI) basket. Food inflation came in at 5.95 per cent in February.

Inflation rate for vegetables contracted marginally by 11.6 per cent against a contraction of 11.7 per cent in the previous month. Meanwhile, inflation rate for fuel and light declined to 9.90 per cent from 10.84 per cent in the month of January.

“February CPI inflation at 6.44 per cent while elevated is broadly in line with expectations. Cereals and milk inflation continues to be high while fruits inflation spiked up too in February. Core inflation at 6.1 per cent remains elevated and sticky with relatively high inflation across clothing and footwear, health, personal care and effects, and and household goods/services. The RBI will remain hawkish in the April policy as inflation prints have spiked back over 6 per cent in January-February along with core inflation remaining sticky above 6 per cent. We continue to expect a 25 bps repo rate hike in the April policy,” said Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities.