India’s retail inflation inched up to an eight-month high of 6.07% in February from 6.01% in January, with rural India experiencing a sharper price rise at 6.38%. For urban consumers, the inflation rate, in fact, fell from 5.91% in January to 5.75% in February.
Food prices saw an upward trajectory, with inflation measured by the Consumer Food Price Index rising to 5.85% in February from 5.43% in January. This trend was divergent for rural and urban India, with the latter seeing a slight moderation in food inflation, while rural food inflation shot up by 0.7 percentage points to 5.87%.
Food and beverages
Food and beverages inflation hit a 15-month high and the rising prices of edible oils are likely to pose a challenge in coming months, ICRA chief economist Aditi Nayar pointed out.
“Inflation appears to have become generalised and we believe it will be 5.5% to 6% through 2022-23, so the Reserve Bank of India [RBI] may consider a change in its forecast too,” Bank of Baroda chief economist Madan Sabnavis said, warning of vegetable prices shooting up further with the onset of summer and the anticipated fuel price hikes this month. The RBI has projected an average retail inflation of 4.5% for the coming year.
Most economists don’t expect the RBI to shift from its accommodative growth-focused policy stance yet, despite the retail inflation crossing its tolerance threshold of 6% for the second month in a row.
Inflation in wholesale prices resurged to 13.11% in February after two months of moderation, staying above the 10% mark for the eleventh month in a row, with fuel and power inflation climbing sharply from January 2022 levels. Manufactured products’ inflation accelerated to nearly 10%, and with input costs staying high, the high prices for producers could feed into more retail inflation in coming months.
“Both petrol and diesel have witnessed increase of over 50% which is a warning of how much retail inflation can also increase in case there is a full pass-through of global oil prices,” said Mr. Sabnavis. With fuel prices expected to be increased this month, retail inflation could see a sharper impact, he added.