Retail inflation in Feb: The retail inflation in February eased marginally to 5.09 per cent, against 5.1 per cent seen in January, data released by the government on Tuesday showed. The Consumer Price Index (CPI) inflation in December 2023 was at 5.69 per cent. The CPI retail inflation has been out of RBI’s medium-term target of 4 per cent for almost 53 weeks in a row.  “The Indian CPI inflation remained unchanged at the previous month's 5.1 per cent YoY in Feb 2024, in line with ICRA’s expectations. Barring food and beverages, the inflation across all other sub-groups eased in Feb 2024, indicating that the momentum in the non-food items continued to track a welcome moderation,” rating agency ICRA said.   The food inflation rose to 8.66 per cent in February against 8.30 per cent in January. The food inflation stood at 9.53 per cent in December.  

 “CPI inflation, broadly in line with the expectations, has remain unchanged at 5.1 per cent in February. While there was a broad-based moderation across all major categories, the inflation was kept elevated by higher food prices, "Rajni Sinha, Chief Economist at CareEdge said.   There was persisting deflation in the fuel and light category. The recent move to further decrease LPG prices is anticipated to keep this segment in the deflationary zone in the coming months. Core inflation remained subdued and moderated even further, consistently staying below the 4% threshold for three consecutive months. A muted consumption demand and a moderation in global commodity prices have continued to impact core inflation prints.  

 “The February CPI print shows flat numbers with no change. More seasonal factors are coming into play,” NR Bhanumurthy, Vice Chancellor of BR Ambedkar School of Economics told Republic Business. He also added, “The broad takeaway is that inflationary pressure is still not gone.”  The retail inflation is in line with the expectations of all economists who made projections that the CPI print in February will come in range of 5-5.1 per cent. 

In an exclusive interview with Republic Business, the Chief Economist of IDFC First Bank said that inflation was expected to be at 5.2 per cent.\  Food and Vegetable Inflation  In February, the vegetable inflation rose to 30.25 per cent, against 27.03 per cent reported in January. Similarly, cereals inflation declined from 7.83 per cent in January to 7.60 per cent in February. Pulses inflation also moderated to 18.90 per cent, against 19.54 per cent reported in January.  “As far as vegetable, pulses, cereals inflation is concerned, in my view they are transitory in my view,” Bhanumurthy said.  

 According to ICRA, the food and beverages inflation printed above the 7 per cent-mark for the fourth month in a row. While the food and beverages inflation posted an unpleasant uptick in Feb 2024 vis-à-vis Jan 2024, this was not broad-based, with seven of the 12 sub-items witnessing a moderation in their YoY inflation print.   Talking about the food inflation, Gaura said, “We expect a slight uptake in food inflation as we exit the winter months and moderation in vegetable prices reduces. On a year-on-year basis, food price pressures remain elevated in vegetables, pulses and spices. Cereals inflation which has been persistent since mid-FY23, has moderated over the last few months.”  Bhanumurthy concurring with Gaura of IDFC First Bank said that rising vegetable prices may push up the inflation numbers going forward. 

“This is a fair kind of assessment in my view,” he added. 

According to Bhanumurthy, the CPI print is posing a challenge in front of RBI's monetary policy meeting which is slated to take place in April. “April is a main monetary policy meeting, and the apex bank will grapple with challenge in navigating interest rate, as CPI is still outside the tolerance bank of RBI.” Bhanumurthy opined.  

 “Looking ahead, a favourable base effect is expected to persist until July 2024, helping absorb potential upward risks to price pressures to a certain extent. For FY24, we expect inflation to average 5.4 per cent, with Q4FY24 at 5.1 per cent. We expect inflation to average 4.8 per cent in FY25. Given that the RBI Governor has been highlighting the aim of getting inflation to 4% on a durable basis, the policy rates are likely to be kept on hold in the upcoming policy meeting, with no change in stance,” Sinha of CareEdge said.