Consumer inflation barely eases to 6.44% in February, still beyond RBI's comfort zone

India's headline retail inflation rate fell to 6.44 per cent in February after spiking to 6.52 per cent in January 2023, data released on Monday by the Ministry of Statistics and Programme Implementation showed. Although, the concern is still far from over as the inflation rate continues to remain beyond the 6 per cent target of the Reserve Bank of India (RBI).

Inflation continued to be a growing concern throughout 2022 until it eased for the first time in November. The country's retail inflation measured by the Consumer Price Index (CPI), dropped to an 11-month low of 5.88 per cent in November 2022 after RBI raised the repo rates several times since April. However, concerns grew again in January 2023, as the inflation breached again in January after being low for just two months.

Inflation in the food basket in Feb 2023 stood at 5.95 per cent, up from 5.94 percent in January, as per the government data. The food basket has weightage of 39.06 per cent  in the overall Consumer Price Index. Fuel prices eased further to 9.9 per cent  in February from 10.8 per cent  in January 2023. On sequential basis though, fuel inflation had inched up to 0.1 per cent  in February 2023. 

However, economists are expecting a rate hike of 25 bps in the next monetary policy meet. “CPI inflation for Feb was at 6.4 per cent  and not different from Jan at 6.5 per cent . We believe there will be another rate hike of 25 bps though the decision within MPC will be fragmented,” added Madan Sadnavis, chief economist, Bank of Baroda.  

Although, the economists are of the opinion that the inflation rate will fall further in March, however, it seems unlikely to go below 6 percent anytime soon.  

“We see food inflation softening in March based on recent price trends. Core inflation at 6.1 per cent  remains elevated and sticky with relatively high inflation across clothing and footwear, health, personal care and effects, and household goods/services. The RBI will remain hawkish in the April policy as inflation prints have spiked back over 6 per cent  in January-February along with core inflation remaining sticky above 6 per cent ,” said Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities. 

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