CPI inflation slows to 5.91% on easing food prices, may increase in April

The consumer Price Index-based (CPI) inflation eased for the second month in a row in March, at 5.91 per cent, on the back of further reduction in rate of food inflation, the official data showed on Tuesday.
 

The CPI inflation was at 6.58 per cent in February. In January, it had touched a 68-month high of 7.59 per cent.
 

Food price inflation (CFPI) for March was 8.76 per cent, compared with 10.81 per cent in February, with the sharpest fall seen in vegetable prices, followed by egg and meat and fish.
 

The Ministry of Statistics and Programme Implementation said that due to the Covid-19 lockdown, the field work for price collection of CPI was suspended with effect from March 19 and about 66 per cent per cent of price quotations were received.
 

“For assessing the price behaviour of remaining quotations, NSO follows well established and internationally accepted methodology and practices,” it said.

Prices are likely to rise again in April, according to analysts, with the actual impact of the Covid-19 and the resultant lockdown yet to be fully seen.
 

“The (March) number does give a sense of improvement in inflation, which is misplaced given that the real impact of the lockdown will be felt sharply in April as prices of food items have increased quite sharply. The food price inflation of 8.7 per cent will tend to increase,” said Madan Sabnavis, chief economist with Care Ratings.

Sabnavis said food price inflation of various items like vegetables, spices, pulses continued to be in double digits and with the shortages witnessed in different centres with mandi arrivals being affected the pressure would be there going ahead. The non-food items have helped to keep overall inflation under control with clothing and fuel bringing down headline number, he said.

“With the lockdown across the country and limited movement of goods due to absence of labour, trucks and activities in wholesale markets, there have been a sharp decline in supplies of foodgrain, horticulture, sugar, which have been reflected in higher prices in the market. This can push food inflation towards the 10-per cent mark,” Sabnavis said.
 

This relief in March may be arrested in the immediate term, with a considerable likelihood of an uptick in urban retail inflation during the period of the lockdown, followed by a subsequent resumption of the correction in the CPI inflation as the situation normalises.
 

“Revenue considerations of the central and state governments suggest that the fall in crude oil prices is unlikely to transmit to a material reduction in retail prices of diesel and petrol in the near term,” said Aditi Nayar, principal economist with Icra.
 

Year-on-year, vegetable inflation rate for March was 18.63 per cent, compared with 31.6 per cent in February. For fruits, it was 3.56 per cent, against 3.96 per cent, and for meat and fish, it was 9.15 per cent versus 10.20 per cent in February. Inflation rate for pulses was 15.85 per cent in March, compared with 16.6 per cent in February.
 

“We can expect CPI inflation in April to be above 6 per cent. However, this number will not be relevant for any monetary action of RBI, which will be driven by other considerations,” Sabnavis said.