In a relief to consumers as well as policymakers, India's retail inflation, measured in the all-India Consumer Price Index (CPI), further cooled to 15-month low of 5.66% in March 2023 from 6.44% in February 2023, on easing food inflation, the data released by the Ministry of Statistics and Programme Implementation shows. With this, the CPI-based inflation has fallen within the Reserve Bank of India’s (RBI) target band of 4%-6%.

On a year-on-year basis, the CPI inflation was 6.95% in March 2022. This time around, the headline inflation eased to 5.51% in rural areas and 5.89% in urban areas. The monthly changes in all India CPI inflation for the month of March 2023 stood at 0.23%.

In the food basket, the inflation rate for vegetables contracted by 8.51% in March as compared to 11.6% in February. For cereals and products, the inflation eased to 15.27% in March from 16.73% in February. The inflation rate for spices also eased to 18.21% from 20.20% a month before.

Food and beverages inflation stood at 5.11% in March, while clothing and footwear saw 8.18% inflation.

Fuel and light inflation also moderated to 8.91% in March as compared to 9.9% in February. The inflation rate for clothing and footwear came down to 8.18% in March from 8.79% in February.

The retail inflation had eased marginally to 6.44% year-on-year in February as compared to 6.52% in January, though it stayed above the RBI's upper threshold limit of 6% for the 2nd straight month.

During the MPC meeting this month, the central bank's panel unanimously decided to keep the repo rate unchanged at 6.5%. The MPC also decided by a majority of 5 out of 6 members to remain focused on the withdrawal of accommodation to ensure “inflation progressively aligns with its target, while supporting growth”.

According to Reserve Bank governor Shaktikanta Das, given the stubbornness in inflation, central banks continue to tighten monetary policy, although at a reduced pace. "Inflation globally has moderated in the recent months, but its descent to the target is proving to be long and arduous."

He said looking ahead, the headline inflation is projected to moderate in 2023-24. "The monetary policy actions taken since May 2022 are still working through the system," he said, adding the MPC will not hesitate to take further action as may be required in its future meetings.

Despite external headwinds, the Indian economy is estimated to grow at 7% in the financial year 2022-2023, and inflation is likely to remain in the range of 5-6%, with risks evenly balanced, the finance ministry said in its latest monthly economic report in March 2023.

"Real GDP estimates for Q3 of 2022-23 reaffirm the ability of the Indian economy to grow on the strength of its domestic demand even as a rise in global uncertainties slow output," said the report released on March 20, 2023.

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