Ajit Karn
India’s rural and urban retail inflation rates were 6.72 percent and 6.1 percent, respectively. Cereals and products and fruits, among other groups, contributed to the February increase in retail inflation.
In addition, the Consumer Food Price Index in February was 5.95 percent, according to the data.
However, vegetable retail inflation decreased 11.61 percent.
Notably, India’s retail inflation, as measured by the Consumer Price Index, was 5.72 percent in December, compared to 5.88 percent in November and 6.77 percent in October.
India’s retail inflation was above the RBI’s 6 percent target for three consecutive quarters, and only in November 2022 did it return to the RBI’s comfort zone.
In accordance with the flexible inflation targeting framework, the RBI is deemed to have failed to control price increases if CPI-based inflation falls outside the range of 2 to 6 percent for three consecutive quarters.
To combat inflation, the RBI has increased the short-term lending rate by a total of 250 basis points, including the most recent 25 basis point increase, since May of last year. Raising the repo rate helps to reduce economic demand and thereby aids in containing inflation.
Raising interest rates is a monetary policy instrument that typically aids in stifling economic demand, thereby reducing inflation.
The Governor of the Reserve Bank of India, Shaktikanta Das, stated last month when announcing monetary policy outcomes that the average retail inflation rate in India is projected to be 5.3% for the next fiscal year, 2023-24.
He had stated that the forecast was based on the assumption of a typical monsoon.
The average inflation rate is projected to be 5% for the first quarter of 2023-24, 5.4% for the second quarter, 5.4% for the third quarter, and 5.6% for the final quarter.
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For the current fiscal year 2022-23 ending in March, inflation was projected to be 6.5%, with a quarterly average of 5.7% from January to March 2023.
