Retail inflation declines to 25-month low in February

Aided by a drop in food prices, Consumer Price Index (CPI)-based inflation fell to 8.1 per cent in February, the second-lowest since the index was launched in 2012, showed data released on Wednesday. Only for January 2012 did CPI-based inflation stand at a lower level (7.65 per cent).

In February 2013, inflation stood at 10.29 per cent; in January this year, it was 8.79 per cent.

Economists cautioned in the coming months, inflation would remain close to the level seen in February, and this was unlikely to allow the Reserve Bank of India to cut the policy rate at its meeting next month. Also, it is expected the El Niño phenomenon might disrupt the monsoon this year.

“Notwithstanding the better-than-expected print for February 2014, elevated retail inflation is unlikely to set the stage for monetary easing in the immediate term,” said Icra senior economist Aditi Nayar.

In rural areas, retail inflation fell from 9.35 per cent in January to 8.51 per cent, while in urban regions, it declined from 8.09 per cent to 7.55 per cent.

Inflation for food items, which account for about 45 per cent weight of CPI, fell to 8.57 per cent from 9.9 per cent in January. At 14.04 per cent, inflation for vegetables was lower than 21.91 per cent in January, though still at elevated levels.

Inflation for eggs, fish, meat and cereals also fell in February. However, inflation for milk products rose from 9.82 per cent in January to 10.37 per cent, while pluses inflation rose from 2.59 per cent to 3.48 per cent.

“While the second advance estimate of crop production indicated a record-high rabi harvest of most major crops in 2013-14, the recent heavy rainfall has damaged crops in parts of the country, which will arrest the recent decline in food prices,” Nayar said.

The innate demand-supply gaps and supply chain inefficiencies were likely to result in food inflation remaining sticky through this year, she added.

While fuel and light inflation fell to 6.13 per cent from 6.54 per cent in January, for clothing, bedding and footwear, it rose from 9.18 per cent to 9.22 per cent.

Data on Wholesale Price Index-based inflation for February is slated to be released on Friday.