India’s retail inflation rose to an eight-month high of 6.07% in February from 6.01% in January, with rural India seeing a stronger price increase of 6.38%. For urban consumers, the inflation rate even fell from 5.91% in January to 5.75% in February.
Food prices trended upwards, with inflation, as measured by the consumer price index for groceries, rising to 5.85% in February from 5.43% in January. This trend was different for rural and urban India, with the latter seeing a moderation in food inflation, while rural food inflation rose 0.7 percentage points to 5.87%.
food and drinks
Food and beverage inflation hit a 15-month high and rising cooking oil prices are likely to pose a challenge in the coming months, ICRA chief economist Aditi Nayar pointed out.
“Inflation appears to have generalized and we believe it will be 5.5% to 6% by 2022-23, according to the Reserve Bank of India [RBI] may also consider changing their forecast,” said Madan Sabnavis, chief economist at the Bank of Baroda, warning of a further rise in vegetable prices with the start of summer and expected fuel price hikes this month. The RBI forecasts average retail inflation of 4.5% for the coming year.
Most economists are not yet expecting the RBI to back away from its accommodative, pro-growth monetary policy, despite retail inflation exceeding its 6% tolerance threshold for the second straight month.
Wholesale price inflation rebounded to 13.11% in February after two months of moderation, remaining above 10% for the 11th straight month, with fuel and electricity inflation rising sharply since January 2022. Processed product inflation accelerated to almost 10% and as input costs remain high, high prices for manufacturers could lead to further retail inflation in the coming months.
“Both petrol and diesel have seen increases of over 50%, which is a warning of how much retail inflation can also rise if there is a full pass-through in global oil prices,” Mr Sabnavis said. With fuel prices expected to increase this month, retail inflation could have a bigger impact, he added.