Retail inflation falls to 6.58% in February as food prices cool down

The latest numbers could increase the clamour for a rate cut by RBI's Monetary Policy Committee in its next meeting in April

Retail inflation based on the Consumer Price Index (CPI) eased to 6.58 per cent in February, from a 68-month high of 7.59 per cent in January, primarily on the back of lower prices of fruits and vegetables, official data showed on Thursday.

The latest numbers could increase the clamour for a rate cut by the Reserve Bank of India’s (RBI's) Monetary Policy Committee (MPC) in its next meeting in April. The government hopes a cut will inject some confidence into the system and boost growth during the time of a global coronavirus pandemic and crashing crude prices, and troubles in the financial sector at home.

“The (February) CPI inflation number and its possible movement to 5.5 per cent in March may not justify rate action by the RBI. However, on account of sending positive signals to the market on supporting the economy at the time of COVID-19, a rate cut could still be on the anvil,” said Madan Sabnavis, chief economist with CARE Ratings.

 

 

According to the data released by the Ministry of Statistics and Programme Implementation, consumer food price inflation (CFPI) for February was recorded at 10.8 per cent, down from 13.63 per cent in January. For the year-ago period (February 2019), CPI inflation was 2.57 per cent, and CFPI was -0.73 per cent.

“The extent of the reduction in the headline CPI inflation in February 2020, combined with an unchanged core print, will provide some relief, and boost the possibility of an up-fronted rate cut in the April policy review, in light of the burgeoning risks to global and domestic growth posed by the rapid spread of the coronavirus, and the monetary policy responses seen from various other central banks,” said Aditi Nayar, principal economist with ICRA.

Nayar said headline inflation will come down below 6 per cent in March while Sabnavis pegged February core inflation at 4 per cent, which could moderate going ahead, with fuel prices coming down in March. “Going ahead, the continued normalisation of vegetable prices would dampen food inflation further in the ongoing month,” Nayar said.

For February, vegetable inflation was reported at 170.7 compared to 197 in January, while fruit inflation came in at 141.8, compared to 143.2. Inflation in other food categories like cereals, pulses and products, meat and fish, spices etc. either remained stagnant or rose slightly compared to January.

Among non-food items, housing and fuel and light showed a slight month-on-month increase, while clothing and footwear, health, transport and communication and some other miscellaneous items stayed broadly unchanged from January.