Contrary to general expectations and much to the dismay of the government, retail inflation as measured by the consumer price index (CPI) continued its relentless upward move for the fifth consecutive month to 10.91 per cent in February, fuelled primarily by higher prices of food commodities such as vegetables, protein-based items, edible oils and cereals.
At this level, CPI inflation has remained sticky at double digits for three months in a row and gradually inching up further at a sustained pitch — from 9.90 per cent in November, to 10.56 per cent in December 2012 and further to 10.79 per cent in January and still higher at 10.91 per cent in February this year.
More surprising is the fact that the overall price spiral in food items has been led by vegetables even during the winter months when the prices of seasonal greens are generally expected to come down.
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In February, for instance, the vegetable segment posted the highest inflation level at 21.29 per cent among all commodities that comprise the CPI basket.
Providing no relief to the common man as far as food commodities are concerned, inflation in the cereals category was 17.04 per cent while protein-rich items such as eggs, meat and fish turned more expensive by 15.72 per cent in February. Alongside, while inflation in oils and fats segment stood higher at 14.56 per cent, pulses were costlier by 12.39 per cent and sugar also turned dearer by 12.10 per cent on a year-on-year basis.
As per the official data, retail inflation in urban areas inched up to 10.84 per cent in February from 10.73 per cent in January while CPI inflation for rural areas stood pegged at 11.01 per cent during the month, up from 10.88 per cent in the previous month.
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For the Reserve Bank of India (RBI) to take a holistic view on whether or not to ease interest rates — as demanded by India Inc. to boost investment and spur growth — the WPI (wholesale price index) inflation data, which is likely to be released later this week, may provide a clearer picture of the price situation.
While the CPI data provides a negative cue, the WPI numbers may provide some comfort in this regard as wholesale inflation in January was much lower at 6.62 per cent which is much higher than the apex bank’s comfort zone of sub-5 per cent. Clearly, a further downtrend in February will certainly help the RBI in making up its mind on a rate cut.
The RBI is slated to announce its mid-quarter monetary policy review on March 19, and both India Inc. as well as the government is looking forward to an easing of interest rates to kick-start the investment and growth engine.