Core inflation falls in March but health inflation remains steady, elevated

Household goods and services, personal care products still hovering at high levels

The crucial core inflation rate fell to a 10-month low of 6 per cent in March 2023, but health inflation remained steady at 6.59 per cent. This is significant in the time of rising Covid cases.
 

Core inflation refers to the rate of price rise in non-food and non-fuel items and is regarded as less volatile in nature.
 

While inflation rates in some other areas within core inflation, such as household goods and services and personal care products, remained elevated, these declined in March compared to February – unlike health. 
 

Inflation in health services rose from 6.5 per cent in February to 6.59 per cent in March. This was the seventh month of consecutive rise in health inflation in March. It has remained over 6 per cent since November, 2022.
 

Part of the steady rise in inflation could be due to medicine prices, which constitute most of the health inflation. Inflation in medicine (non-institutional) rose to 7.20 per cent in March from 7.15 per cent in February. It has remained over 6 per cent since October, 2022.
 

"Medicines account for 70 per cent of the weight of health in the consumer price index. That is seeing higher inflation," said Aditi Nayar, chief economist at ICRA.
 

Among other categories of health, inflation in doctor/surgeon fee-first consultation (non-institutional) also increased from 5.71 per cent in February to 6.01 per cent in March.
 

At 9.43 per cent, personal care products saw high inflation in February, which declined to 8.25 per cent in March. Inflation in household goods and services declined to 7 per cent in March from 7.35 per cent in February.
 

"Barring health, all other categories of core inflation saw easing of momentum in March, 2023," a note by QuantEco Research said.
 

The decline in core inflation to 6 per cent in March was a pleasant surprise, since it had remained sticky at elevated levels since January 2021, at least. The next few months will indicate whether it will ease below 6 per cent.
 

"There was a relatively larger step-up in prices of some services in the post-pandemic period, following the reopening in the economy,” Nayar said, adding, “However, annual changes in the services segment are likely to be of a smaller quantum going ahead, which may lead to some tempering in core inflation in 2023-24."
 

In its April policy, the Monetary Policy Committee of the Reserve Bank of India had said that the lagged pass-through of input costs could keep core inflation elevated.