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Retail inflation eases to 4.44% year-on-year in February

Analysts polled by Reuters had forecast February's consumer price inflation to ease to 4.80 percent from 5.07 percent in the previous month.

By: Reuters | New Delhi | Published: March 12, 2018 6:02:53 pm
Industry figures out: Nov factory production jumps to 8.4%, a 25-month high Food inflation, as measured by Consumer Food Price Index, rose to 4.96 per cent in December from 4.35 per cent the previous month.

The annual retail inflation eased for the second straight month in February to 4.44 percent, as food prices fell, government data showed on Monday.
Analysts polled by Reuters had forecast February’s consumer price inflation to ease to 4.80 percent from 5.07 percent in the previous month.


“The downward move in inflation is on the back of seasonal food price reduction. This trend will likely taper off over the next one-two months as the effect of the kharif harvest wanes. Further, adverse base effect will move inflation to its peak of around 5.5-6.0 percent before gliding towards 4.5 percent by March 2019.”

“The RBI will remain cautious. It is important to note that compared to its stated target of 4 percent on a durable basis, inflation is due to remain around 4.5 percent for the major part of FY2019. While growth conditions may not warrant a hike immediately, we expect the RBI to be cautious on any upside surprises to its inflation estimates and remain on a pause.”

“We are not pencilling in a rate hike cycle as our base case as of now. The RBI in 1HFY19 would want to look at how various risks such as states’ HRA impact, monsoons, crude and other commodity prices, MSP increases, Fed rate hike cycle, etc. pan out and evaluate the necessity to shift gears.”

“The upside risks to inflation will emanate from adverse monsoons, increase in MSPs for kharif crops, fiscal slippages at a consolidated level and adverse expenditure quality, implementation of states’ HRA, global growth-led renewed pressure on crude oil and other commodity prices, etc, while downside risks could emanate from a prolonged weak domestic demand.”


“My CPI projection again spot on at 4.4 percent led by a sharp fall in food inflation exactly predicted by me at 3.38 percent. This is led by a sharp correction in vegetable prices and continued disinflation in pulses. What is noteworthy is that this low reading is despite an unfavourable statistical base. This clearly shows that inflation is not a serious risk for India. IIP growth is still very skewed and facilitated by favourable statistical base.”

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