India’s March retail inflation rises to 3.81% month-on-month

Shrugging off the depressive effect of demonetisation, India’s Consumer Price Index (CPI), or retail inflation, during March rose month-on-month at 3.81 per cent, as compared to 3.65 per cent in February, official data showed on Wednesday. Year-on-Year, however, the inflation rate fell as compared to 4.83 per cent recorded in March 2016.

Consumer food price inflation moderated to 1.93 per cent, as compared to 2.01 per cent in February.

The Central Statistics Office data revealed that the annual retail inflation for rural India was 3.75 per cent while that for the urban centres was 3.88 per cent. The annual food inflation was 1.85 per cent in rural areas and 2.27 per cent in the urban areas.

The government target is four per cent plus-or-minus two percentage points for the next five years.

Earlier this month, with inflationary concerns in mind, the Reserve Bank of India (RBI) retained its key lending rate unchanged at 6.25 per cent, saying it awaited further macroeconomic data before deciding on any changes.

The RBI said risks are evenly balanced around the inflation trajectory at the current juncture. “There are upside risks to the baseline projection,” the RBI policy statement said.

“Inflation developments have to be closely and continuously monitored, with food price pressures kept in check so that inflation expectations can be re-anchored. At the same time, the output gap is gradually closing. Consequently, aggregate demand pressures could build up, with implications for the inflation trajectory,” it added.

At its last policy review in February 8, 2017, while holding rates at 6.25 per cent, the RBI had changed its policy stance from “accommodative” to “neutral”.

Expectations that the RBI will maintain status quo on rates had been fuelled by inflation numbers, with wholesale inflation soaring to over a three-year high of 6.55 per cent in February and retail inflation climbing to 3.65 per cent due to rise in food and fuel prices.

March vegetable prices plunged by (-)7.24 per cent on a year-on-year basis, while the cost of pulses and its products fell more sharply by (-)12.42 per cent.

The prices of milk and milk-based products surged by 4.69 per cent. Other protein-based food items such as meat and fish became dearer by 2.96 per cent.

Edible oils and fats prices increased by 3.76 per cent, whereas those for sugar and confectionery rose a whopping 17.05 per cent on a YoY basis.

The cost of cereals and its products appreciated by 5.38 per cent and prices of fruits were up by 9.35 per cent.