Food prices pull retail inflation to 6-month low

Retail inflation, measured by the Consumer Price Index (CPI), eased to a six-month low of 4.83 per cent in March from 5.26 per cent in February, according to data released by the Central Statistics Office (CSO) on Tuesday.

Retail inflation was at 5.25 per cent in March 2015. It is trending below the RBI (Reserve Bank of India)'s target of 5 per cent by the end of the current financial year.

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The decline in retail inflation can be largely attributed to a reduction in food prices. Food inflation, the biggest component of CPI, eased to 5.21 per cent in March, from 5.30 per cent in February. The food index, which accounts for more than 45 per cent of CPI, had edged up to 6.14 per cent in March 2015.

Within the food index, pulses registered the sharpest rise at 34.15 per cent, though it was lower than the 38.3 per cent seen in February. It was the only category that saw double-digit inflation. In the meat-and-fish category, prices edged up by 7.74 per cent in March from 7.27 per cent in February.

CARE said in a note: "The IMD (India Meteorological Office) has also indicated that the monsoon this year will be higher than normal, which is good news, though the arrival and progress is important along with the geographic spread." After two years of back-to-back droughts, a good monsoon could moderate food prices further, dragging down inflation.

Within the non-food category, February inflation moderated to 3.38 per cent in the fuel and light category, from 4.59 per cent in March. A similar trend was observed in the transport and communication categories - 0.91 per cent in March from 2.39 per cent in February. Inflation eased in rural and urban areas. In towns, CPI-based inflation declined to 3.95 per cent in March from 4.3 per cent in February. The corresponding figures for rural areas were 5.7 per cent and 6.05 per cent, respectively, for March and February.