The government data released on Friday shows that India's retail inflation has declined to 4.85 per cent in March, compared to 5.09 per cent in February this year. Last year in March, the Consumer Price Index (CPI)-based retail inflation was 5.66 per cent.
The National Statistical Office, under the Ministry of Statistics and Programme Implementation (Mospi), has released the All India Consumer Price Index (CPI) and corresponding Consumer Food Price Index (CFPI) for Rural (R), Urban (U) and Combined (C) for March 2024.
This data shows a more stable pricing environment, potentially offering relief to households in their daily expenses. The decline in food inflation has also played a role in moderating overall inflation. In March, food inflation decreased to 8.52 per cent, down from 8.66 per cent in February.
Urban inflation decreased to 4.14 per cent in March from 4.78 per cent in February. However, rural inflation saw an increase, inching up to 5.45 per cent compared to 4.34 per cent in February. This difference in inflation rates between urban and rural areas could imply that there are variations in consumption patterns and supply chain dynamics across different regions.
“The headline inflation for March has come in line with expectations. While core inflation continues to moderate, we remain wary of the heatwaves going ahead which could keep food inflation elevated and volatile in the summer months.
Overall, we expect the monetary policy committee (MPC) to remain in a wait-and-watch mode until H1 FY25, with possible easing likely towards the latter part of FY25 depending on the evolution of monsoons, crude oil prices and timing of Fed’s rate easing cycle,” said Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.
The moderation in retail inflation comes amid other positive economic indicators. The Index of Industrial Production (IIP) for March showed robust growth, expanding by 5.7 per cent compared to 3.8 per cent in January 2024.
“The industrial growth in February 2024 rose to 5.7 per cent, nearly in line with our expectations (+6.0 per cent), partly benefitting from the extra day in the leap month. The disaggregated data was quite mixed, ranging from a contraction of 3.8 per cent in consumer durables and a double-digit expansion of 12.3 per cent in consumer durables in February 2024,” said Aditi Nayar, Chief Economist, Head Research and Outreach, Icra.
This latest inflation data comes a week after the RBI's Monetary Policy Committee (MPC) declared its decision to maintain the policy repo rate at 6.5 per cent for the seventh consecutive time on 5 April 2024. The RBI Governor has stated that the retail inflation forecast for FY25 has been reduced from 4.7 per cent to 4.5 per cent.
"Headline inflation number cooling down to a 10-month low of 4.85 per cent is a welcome relief. However, with food inflation figures at 7.68 per cent, contrasted with 7.76 per cent in February, sustained price pressures in eggs, pulses and vegetables now seem to be concretising.
Agri-market participants would keep a keen eye on the rabi harvest, which could ease hardening food prices in the coming months. An increase in the overall rabi acreage will also bring some comfort, provided the monsoon does not play spoilsport,” said Shlok Srivastav, Co-founder and chief operating officer (COO), Appreciate, a Sebi and IFSCA registered fintech company.
However, policymakers will continue to closely monitor inflation trends to ensure economic stability and sustainable growth in the coming months.
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