Retail inflation eases to 4-month low at 5.09% in Feb; IIP grows 3.8% in Jan

Retail inflation, measured by the consumer price index (CPI), cooled to a four-month low at 5.09% in February on an annual basis from 5.10% in January last month, amid a broad-based ease in prices across goods and services, as per the Ministry of Statistics and Programme Implementation (MoSPI) data released today. The figure was largely in line with expectations as poll conducted by economists from Reuters had pegged retail inflation to ease to 5.02%.

Food price inflation, however, continued its upward trajectory, rising to 8.66% in February, from 8.3% in January.

The CPI (General) for the month of February fell to 4.78% in urban India against 4.92% in January, while the headline inflation in the rural areas was steady for the second consecutive month at 5.34% in February. Food price inflation, however, rose in both rural and urban areas.

“Headline inflation in February 2024 stands at 5.09%, slightly below market expectations of 5% and lower than January's 5.10%. The major contributor was food inflation, registering at 8.66% against 8.3% in January. Core inflation remains below 3.4%, offering significant reassurance and potentially steering headline inflation closer to the RBI's 4% target in the long run,” says Akhil Mittal, Senior Fund Manager-Fixed Income, Tata Asset Management.

“While the RBI has highlighted the risk of food inflation spilling over into broader inflation, we anticipate the regulator to maintain a cautious stance. However, softening of core inflation should provide relief.  We think RBI would rather continue with stability priority and continue maintaining 4% inflation target as sacrosanct, and hence we do not see premature easing from RBI,” Mittal says.

The Reserve Bank of India (RBI) in its last bi-monthly policy meeting had revised the inflation projection for Q4 FY24 downward to 5%, from 5.2% in the previous MPC meeting. The RBI also kept the policy rate unchanged at 6.5% to facilitate full monetary transmission. 

Meanwhile, another data released by the MoSPI showed that industrial production remained steady at 3.8% in January. “For the month of January 2024, the Quick Estimates of Index of Industrial Production (IIP) with base 2011-12 stands at 153.0. The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of January 2024 stand at 144.1, 150.1 and 197.1 respectively,” the ministry says in a release today.