Retail inflation drops to 15-month low of 5.66%

Retail inflation in March fell to a 15-month low of 5.66 per cent and came back to the Reserve Bank’s comfort level of 6 per cent, as prices of vegetables and protein-rich items eased, showed government data released on Wednesday.

The retail inflation based on Consumer Price Index (CPI) was 6.44 per cent in February 2023 and 6.95 per cent in the year-ago period. The previous low was also 5.66 in December 2021.

The Reserve Bank has been mandated by the government to ensure inflation remains within the 4-6 per cent bracket. The CPI was above 6 per cent in January and February.

According to the National Statistical Office (NSO), the year-on-year inflation declined in the vegetable basket by 8.51 per cent, oil and fats by 7.86 per cent and meat and fish by 1.42 per cent in March.

However, the rate of price rise in spices was high at 18.2 per cent in March, followed by ‘cereals and products’ by 15.27 per cent. Fruits too were expensive.

The overall inflation in the food basket was 4.79 per cent in March against 5.95 per cent in February and 7.68 per cent in the year-ago period. The food basket has a weightage of 54.18 per cent in the overall CPI.

Retail inflation had remained above the RBI’s upper tolerance level of 6 per cent since January 2022, except for November and December 2022.

The decline in the CPI-measured inflation in March justifies the pause mode of policy rates by the RBI earlier this month.

The Reserve Bank, which mainly factors in CPI while arriving at its bi-monthly monetary policy, had paused its rate hike spree in April as global banking woes added uncertainty to the economic outlook. The RBI has also lowered its inflation forecast to 5.2 per cent for 2023-24 from 5.3 per cent, with Governor Shaktikanta Das saying “war against inflation has to continue”.

NSO collects price data from selected 1,114 urban markets and 1,181 villages across the country. During March 2023, it collected prices from 100 per cent of villages and 98.5 per cent of urban markets.

India’s industrial production growth rose marginally to 5.6 per cent in February from 5.5 per cent in January 2023, mainly due to good performance of the power, mining and manufacturing sectors, according to official data released on Wednesday.

There was an improvement on an annual as well as sequential basis. The factory output growth measured in terms of the Index of Industrial Production (IIP) stood at 1.2 per cent in February 2022.

As per the IIP data released by the National Statistical Office (NSO), the manufacturing sector’s output grew 5.3 per cent in February 2023 from 0.2 per cent a year ago. Mining output growth remained flat at 4.6 per cent during the month under review compared to the year-ago period.

Power generation surged 8.2 per cent in February 2023 against 4.5 per cent. As per use-based classification, the capital goods segment recorded a growth of 10.5 per cent in February against a growth of 1.3 per cent a year ago.

Consumer durables output during the month declined by four per cent against a contraction of 9.7 per cent a year ago.

Consumer non-durable goods output expanded by 12.1 per cent against a decline of 6.8 per cent earlier.

Infrastructure/construction goods posted a growth of 7.9 per cent compared to an 8.6 per cent expansion in the same period a year ago. The data also showed that the output of primary goods logged 6.8 per cent growth in the month against 4.6 per cent in the year-ago period. The intermediate goods output in February contracted by 0.3 per cent compared to a growth of 4.1 per cent during the corresponding month last year.

For the first 11 months of fiscal 2022-23 (April-February), the growth in IIP works out to be 5.5 per cent, down from 12.5 per cent in the year-ago period.