CPI inflation eases to four-month low of 4.44% in February 2018

CPI inflation eases to 4.44% in February 2018 food inflation at 3.26

Illustration image of Mandi market

In February, consumer food price index softened to 3.26 per cent as against 4.7 per cent in January.

The data come soon after the second advance estimate of GDP, which revised upwards the growth prospects for the fiscal to 6.6 per cent from the previous projection of 6.5 per cent.

Shoppers ride escalators inside a store at a mall in Mumbai, India, July 10, 2017. In January, the index expanded by 4 percentage points from 7.1 per cent in December.

The indices of industrial production for mining, manufacturing and electricity sectors for the month of January 2018 stands at 114.5, 133.8 and 149.5 respectively, with the corresponding growth rates of 0.1 percent, 8.7 percent and 7.6 percent as compared to January 2017. Within the food items, the inflation fell for vegetables to 17.57%, fruits 4.80%, meat and fish 3.31%, sugar and confectionery (-) 0.26% and cereals and products 2.10%.

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Retail inflation fell to a 4-month low of 4.44 percent in February on cheaper food articles and lower cost for fuel. For H2FY19, RBI has projected CPI inflation to be 4.5-4.6% with risks skewed to the upside.

"While 7.5% industrial growth for January looks quite good and the IIP expansion beyond 7% for the last three months gives additional boost to the sentiment, it would be safe to assume that a lot of advantage has accrued because of the low base effect of the previous year when the growth had plunged following the demonetisation", said industry body Assocham, adding, "We can see an underlying pick up in the growth trajectory".

Consumer durables recorded a growth rate of 8 per cent as against a decline of 2 per cent in the same month a year ago. "Domestic pump prices of petrol and diesel rose sharply in January, reflecting lagged pass-through of the past increases in worldwide crude oil prices". However, the inflation moved up for pulses and products (-) 17.35% and spices (-) 1.01% in February 2018.

"The sharp dip in retail inflation in February has reinforced our expectation that the MPC would keep the repo rate unchanged in the upcoming policy review in April, which may prompt a further easing of bond yields in the immediate term", said Aditi Nayar, Principal Economist, ICRA, warning that inflation may see a spurt in the coming months.

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