of India retail inflation Government data on Tuesday showed food prices rising to 6.95 per cent in March, indicating a continued rise. Inflation as measured by the CPI (Consumer Price Index) stood at 6.07 per cent in the month of February. The Consumer Price Index (CPI) inflation print for March is well above the consensus estimate. Economists had expected CPI inflation to rise to 6.35 percent, according to a Reuters poll.
This is the third consecutive month in which inflation has crossed the 6 per cent upper limit of the Reserve Bank of India’s (RBI) mandate, from an average of 6.4 per cent in January-March. As such, the Monetary Policy Committee (MPC) will fail to fulfill its mandate due to inflation exceeding 6 per cent in April-June and July-September.
The latest RBI forecast puts average CPI inflation at 6.3 per cent in April-June and 5.8 per cent in July-September.
Food inflation to remain high
food inflation It rose to 7.68 per cent in the reporting month as compared to 5.85 per cent in February. The spike in the food basket was due to a sharp rise in oil and fat prices, which climbed 18.79 per cent year-on-year in March. Apart from this, the prices of vegetables saw a rise of 11.64 per cent, while meat and fish saw a rise of 9.63 per cent and spices by 8.50 per cent. Non-alcoholic beverages rose 5.62 per cent, cereals and products up 4.93 per cent and milk and products up 4.71 per cent last month.
Besides food and beverages, fuel and lighting segment rose by 7.52 per cent, clothing and footwear by 9.40 per cent, housing segment by 3.38 per cent and betel, tobacco and narcotics by 2.98 per cent.
The full impact of the spike in crude oil and global energy prices following Russia’s invasion of Ukraine in late February is not expected to be reflected in consumer prices until April as pass-throughs to consumers at fuel pumps were delayed.
Food prices, which account for nearly half of the inflation basket, are also expected to remain elevated as supply chain problems related to the Russo-Ukraine war disrupt global grain production, supplies of edible oils and fertilizer exports.
The price of palm oil, the world’s most widely used vegetable oil, has risen nearly 50 per cent this year. The rise in food prices is increasingly felt by millions of people living below the poverty line, who have already been hit by the pandemic on jobs and incomes.
Furthermore, unlike major central banks, which are facing inflation rates at multi-decade highs, the RBI has opted to keep interest rates stable even if inflation is well above its target and soon itself shows no sign of ending any time.
RBI Governor Shaktikanta Das in his speech said that given the extreme volatility in global crude oil prices since late February and the extreme uncertainty over evolving geopolitical tensions, any projections of growth and inflation are risky, and This is largely dependent on future oil and commodity price developments.
Separately, India’s factory output, measured in terms of the Index of Industrial Production (IIP), saw a rise of 1.7 per cent in February, showed two separate data released by the Ministry of Statistics and Program Implementation (MoSPI) on Tuesday.
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