Feb retail inflation at a high of 10.9%

Inflation is in the double-digit terrain for third month in a row

The consumer price index (CPI)-based inflation reached a peak of 10.91 per cent in February, against 8.83 per cent in the corresponding period of the previous year and 10.79 per cent in January. The inflation was largely driven by high food prices. The data for February’s wholesale price index (WPI)-based inflation is likely on Thursday. It saw a considerable deceleration in January, at 6.62 per cent against 7.18 per cent in December.

These numbers assume importance as the Reserve Bank of India (RBI) is scheduled to announce its mid-quarter review of monetary policy on March 19. Those batting for a cut in the policy rate have been citing a decline in WPI inflation. Economic affairs secretary Arvind Mayaram today built a case for rate cut on easing inflation. He was also referring to the WPI inflation.

According to data released today, rural areas bore the brunt of the retail price inflation as the CPI-based inflation for these areas had risen to 11.01 per cent from 10.79 per cent in January; and that of urban areas had risen to 10.84 per cent from 10.73 per cent. (DOUBLE-DIGIT TERRAIN)

Food and beverages inflation grew to 13.73 per cent in February, with the rate of price rise in vegetables witnessing a growth to 21.2 per cent, cereals 17.04 per cent and egg and non-vegetarian items by 15.72 per cent. In January, food inflation was 13.36 per cent, while in February 2012, it was 6.62 per cent. Food inflation in rural areas was 13.53 per cent. In urban areas, it was 13.87 per cent. When fuel and light inflation grew to 8.67 per cent in February, “clothing, bedding and footwear” rate of price rise was up to 10.91 per cent.

On the other hand, the wholesale price index-based inflation has been declining since October 2012, standing at a four-year low of 6.62 per cent in January 2013. In December 2012, the WPI growth was 7.18 per cent. RBI’s comfort zone is five to six per cent.

Many economists expect RBI to slash interest rate again. In its monetary policy review on January 29, the central bank had cut the repo rate, the rate at which it lends money to banks, by 25 basis points, from eight per cent to 7.75 per cent. RBI had also cut the cash reserve ratio, the portion of money banks are required to park with the apex bank, by 25 basis points to four per cent.