Retail inflation in India remains above 6% for the second consecutive month

At 6.44%, India’s retail inflation remained above the Reserve Bank of India’s upper band (6%) for the second consecutive month in February. Retail inflation in February was slightly lower than in January (6.52%), according to data published by the National Statistics Office.

According to Business Standard, the fact that inflation has exceeded the limit set by the Reserve Bank of India for the second month in a row may trigger another rate hike of 25 basis points by the Monetary Policy Committee, which will meet in April.

The price of food, such as meat, fish, eggs and legumes, as well as that of fuel and electricity, fell a little in February, but cereals (16.73%), milk (9 65%), fruit (6.38%) and housing (4.83%).

Rural inflation, at 6.72% (versus 6.85% in January), continued to outpace urban inflation (6.10% in February, versus 6% in January), Indian Express reported.

“The second consecutive month of inflation above 6% makes the work of the monetary authority difficult. The impact of monetary policy will be felt late and the monetary tightening of fiscal year 23 would push the inflation rate down. However, core inflation stickiness is becoming a big problem for the monetary policy committee…price trends and currently available indicators are making the work of the monetary policy committee more difficult However, India Ratings believes that the odds are more in favor of another 25 basis point repo rate hike in April 2023 monetary policy. India Ratings expects March 2023 retail inflation to be 5.7%, leading to the 4TFY23 retail inflation to be above 6%, five consecutive quarters of above 6% inflation,” said Sunil Kumar Sinha, chief economist at India Ratings.

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“There is concern about milk inflation, which stands at 9.7%. This year prices have been raised often, at least three times, to adjust for higher feed costs. These prices will never come down.

The price of food, such as meat, fish, eggs and legumes, as well as that of fuel and electricity, fell a little in February, but cereals (16.73%), milk (9 65%), fruit (6.38%) and housing (4.83%).

Spices inflation has peaked at 20% and while its percentage in the shopping basket is small, it is important because it reflects mismatches between supply and demand. Prepared foods have registered an inflation of 8%, when the costs are passed on. In this regard, one has to remember that prices are rarely lowered even if costs are lowered,” added Madan Sabnavis, chief economist at Bank of Baroda.

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