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Tuesday, September 29, 2020

March retail inflation eases to 5.91% on muted demand, low food prices

Going ahead, economists expect inflation to be weighed down by low energy prices and subdued economic activity, even as some rise may be seen on the food side due to supply-side disruptions.

By: ENS Economic Bureau | New Delhi | Updated: April 14, 2020 12:47:41 am
india march 2020 cpi retail inflation, india consumer price index cpi inflation march 2020, nirmala sitharaman, india food inflation march 2020, business news india, indian economy news, indian express business news Finance Minister Nirmala Sitharaman, wearing a home-made protective mask arrives to resume office, in New Delhi, Monday. (PTI)

Retail inflation eased to a four-month low of 5.91 per cent in March from 6.58 per cent in February, with the food inflation moderating to 8.76 per cent from 10.81 per cent a month ago, data released by the National Statistical Office (NSO) Monday showed.

The retail inflation rate was based on 66 per cent of the usual price quotations as the nationwide lockdown to counter COVID-19 pandemic had led to suspension of fieldwork for price collection after March 19, while the rest of the data was generated through simulations, details of which were not provided in the release.

The inflation rate in March remained within the Reserve Bank of India’s (RBI’s) medium-term target of 4±2 per cent for Consumer Price Index (CPI) inflation, due to suppressed demand, especially for non-essential items, as the lockdown was imposed towards the end of the month.

Going ahead, economists expect inflation to be weighed down by low energy prices and subdued economic activity, even as some rise may be seen on the food side due to supply-side disruptions.

“The number does give a sense of improvement in inflation, which is misplaced given that the real impact of the lockdown will be felt sharply in April as prices of food items have increased quite sharply. The food price inflation of 8.7 per cent will tend to increase. Also, the food price inflation of various items like vegetables, spices, pulses continue to be in double digits and with the shortages witnessed in different centres with mandi arrivals being affected, the pressure will be there,” Madan Sabnavis, chief economist, CARE Ratings said.

Among the food and beverages segment, inflation rate for vegetables eased to 18.63 per cent in March from 31.61 per cent in February. Inflation rate for cereals and products was recorded at 5.30 per cent for March against 5.23 per cent a month ago, while that for pulses and products was at 15.85 per cent in March against 16.61 per cent in February. Inflation for the fuel and light segment rose to 6.59 per cent from 6.36 per cent in February.

Economists expect the RBI to undertake further rate cuts, though inflation may not remain the primary deciding factor in view of the other economic impact due to COVID-19. “Minutes from the March meeting underscore the RBI’s readiness to act to defend against risks to financial stability and growth outlook. For one, more rate cuts of around 50 bps are likely after March’s subdued inflation and increasing likelihood of an extension in the lockdown,” Radhika Rao, economist, DBS India, said.

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