India’s retail inflation accelerated to 6.95 per cent in March, signalling a sustained food price rise, government data showed on Tuesday. Inflation, as measured by the CPI (Consumer Price Index) was 6.07 per cent in the month of February. The Consumer Price Index (CPI) inflation print for March is well above the consensus estimate. As per a Reuters poll, economists had expected CPI inflation to rise to 6.35 per cent.
This is the third consecutive month in which inflation has come in above the 6 per cent upper bound of the Reserve Bank of India’s (RBI) mandate, averaging 6.4 per cent in January-March. As such, 6 percent-plus inflation in April-June and July-September will see the Monetary Policy Committee (MPC) failing to meet its mandate.
The RBI’s latest forecast pegs 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 jumped 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 prices of oils and fats which climbed 18.79 per cent on year in March. Apart from this, the vegetable prices saw a rise of 11.64 per cent while that meat and fish gained 9.63 per cent and spices rose 8.50 per cent. Non-alcoholic beverages spiked 5.62 per cent last month, cereals and products climbed 4.93 per cent and milk and products rose 4.71 per cent.
Apart from food and beverages, the fuel and light segment rose 7.52 per cent, clothing and footwear gained 9.40 per cent, housing segment inched up 3.38 per cent and the pan, tobacco and intoxicants climbed 2.98 per cent.
The full effect of the spike in crude oil and global energy prices following Russia’s invasion of Ukraine in late February is not expected to appear in consumer prices until April as the pass-through to consumers at fuel pumps was delayed.
Food prices, which account for nearly half the inflation basket, are also expected to remain elevated as supply chain problems related to the Russia-Ukraine war disrupt global grain production, supply of edible oils and fertiliser exports.
Prices of palm oil, the world’s most widely used vegetable oil, surged nearly 50 per cent this year. Food price rises are sharply felt by millions living below the poverty line who have already taken a hit on jobs and incomes due to the pandemic.
Moreover, unlike major central banks which are faced with inflation rates at multi-decade highs, the RBI has opted to leave interest rates steady even as inflation has crept well above its target and shows no signs of abating any time soon.
RBI Governor Shaktikanta Das in his speech said that given the excessive volatility in global crude oil prices since late February and the extreme uncertainty over the evolving geopolitical tensions, any projection of growth and inflation is fraught with risk, and is largely contingent upon future oil and commodity price developments.
Separately, India’s factory output, measured in terms of Index of Industrial Production (IIP), witnessed a growth of 1.7 per cent in February, two separate data released by the Ministry of Statistics & Programme Implementation (MoSPI) showed on Tuesday.