NEW DELHI: The consumer price-based inflation (CPI) in the month of February moderated to 6.4% from a 3-month high of 6.5% in the previous month, according to government data. Retail inflation is still above the RBIs' upper tolerance level of 6%. Food inflation cooled to 5.95% in February as compared with 6% in the previous month. Retail inflation came down owing to moderation in the prices of eggs, vegetables, edible oils and meat and fish.
Retail prices of eggs fell massively by 5.7%, followed by vegetables at 2.5%, edible oils at 1.7% and meat and fish at 1.6%. Meanwhile, cereal prices still remain a concern registering a 0.9% increase in February, though at a slower pace than in the previous month at 2.6%. Fruit baskets recorded higher inflation sequentially at 3.3%.
“For the second straight month, inflation stayed outside the Reserve Bank of India (RBI’s) watermark. To be sure, fuel inflation has begun to ease on softer crude oil prices, but food and core continue to be the pain points with inflation rates above 6%. That means another rate hike by the RBI in April cannot be ruled out,” Dipti Deshpande, Principal Economist, CRISIL Ltd said.
“For fiscal 2024 though, we expect inflation to decline to 5% next fiscal (vs 6.8% estimated in the current one). Inflation is expected to moderate next fiscal, helped by a reduction in fuel and core inflation. Food – a big mover of overall inflation – faces risks from the ongoing heat wave. Then there is the likelihood of El Nino coming into play over the next few months, which could also play spoilsport,” she further added.
Experts are expecting another rate hike in the next monetary policy meeting by the Reserve Bank of India because of elevated inflation. The Reserve Ban of India’s Monetary Policy Committee (MPC) is scheduled to meet during April 3-6. It is to be noted that in its previous meeting, it had raised the repo rate by 25 basis points to 6.5%.
According to senior economist Suvodeep Rakshit of Kotak Institutional Equities, the RBI will remain hawkish in the April policy as inflation prints have spiked back over 6% in January-February along with core inflation remaining sticky above 6%. “We continue to expect a 25 bps repo rate hike in the April policy,” he said.
