February 24 2020
CPI inflation eases to 5-month low
13 April 2018

March inflation at 4.28% as food price gains moderate; February industrial output growth slows to 7.1%

India’s retail inflation eased to a five-month low in March, but remained above the central bank’s medium-term target, supporting views that monetary policy is likely to remain unchanged at the next review in early June.

The Reserve Bank of India (RBI), which has kept rates steady since a cut of 25 basis points in August, is widely expected to maintain rates at their current level in the next review due on June 6.

Last week, RBI lowered its April-September retail inflation projection to 4.7% to 5.1%, from a previous range of 5.1% to 5.6% released in February.

India’s consumer price index rose 4.28% in March from a year earlier, data released by the Ministry of Statistics showed on Thursday.

Analysts polled by Reuters had predicted March’s consumer inflation rate would ease to 4.20% from 4.44% in February. Forecasts ranged from 3.90% to 5.10%.

RBI seen on ‘hold’

Most of the analysts expect the monetary policy committee will hold rates for at least a few months.

“We expect that the committee will hold rates in the coming months in order to completely assess the macro conditions before going in for a rate hike toward the end of the year,” said Anis Chakravarty, a lead economist and partner at Deloitte India.

The retail inflation rate has been moderating since it hit a 17-month high of 5.2% in December.

It had crossed the 12% mark in 2013, but has remained under control since, thanks to lower crude oil prices, tighter monetary policy and fiscal measures.

RBI Governor Urjit Patel said last week there were still uncertainties, such as a proposed hike in the minimum purchase prices of foodgrains, fiscal slippage worries and volatility in global crude prices.

Consumer food prices rose 2.81% in March, compared with 3.26% in February, as prices of pulses fell more than 13.4% from a year earlier.

Rising global crude oil prices and domestic health cost prices are contributing to India’s inflation while prices of services, such as Internet data prices, have fallen.

Prime Minister Narendra Modi, who has ended subsidies on petrol and diesel, had raised fuel taxes to raise about ₹2 trillion ($30.59 billion) in extra revenue in 2015/16.

Fuel and light inflation stood at 5.73%, compared with 6.80% in February, while housing inflation stood at 8.31%, from 8.28% the previous month. Core inflation, excluding food and energy, was estimated at 5.1% to 5.3% in March.

Manufacturing buoys IIP

Separately, industrial output grew 7.1% in February, mainly driven by robust performance of the manufacturing sector coupled with higher offtake of capital goods and consumer durables.

The Index of Industrial Production (IIP) recorded a growth of 8.54% in November, 7.1% in December and 7.4% in January, as per the revised data.

During April-February, IIP growth slowed to 4.3% from 4.7% in the year-earlier period.

Manufacturing sector, which constitutes over 77% of the index, grew at 8.7%.



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