oppn parties Retail Inflation Eases With Moderation In Food Prices

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Retail Inflation Eases With Moderation In Food Prices

By Linus Garg
First publised on 2023-04-13 07:29:36

About the Author

Sunil Garodia Linus tackles things head-on. He takes sides in his analysis and it fits excellently with our editorial policy. No 'maybe's' and 'allegedly' for him, only things in black and white.

Against the backdrop of consistently gloomy news on the global economic outlook (the IMF had cut India’s GDP growth rate in FY24 to 5.9% just a day earlier), the National Statistical Office released cheerful data on Wednesday which showed that while industrial output rose marginally in February, retail inflation dipped to 5.7% in March from 6.4% in February, mainly due to moderation in food prices. While rural inflation was at 5.5%, it was 5.9% in urban areas.

If inflation remains under control, experts see the RBI maintaining the pause in key interest rate hike and bat for growth. After the April meeting when the MPC paused the rate hike, RBI governor Shaktikanta Das had pointedly said that the apex bank was watching the situation and the policy decision was not a pivot as the bank will wait for a durable decline in inflation closer to target. Experts now feel that with food prices moderating and expected to moderate further in view of the expected bumper rabi crop, the RBI is likely to maintain status quo in key interest rates.

The Index of Industrial Production (IIP) rose to 5.6% in February, up from 5.5% in January. Although this is an insignificant rise, the good news is that experts feel that in terms of rolling three-month average, the overall growth in IIP is still fairly steady. This shows that although industrial output is not galloping, it is not falling too and demand is fairly steady across sectors.

But with the International Energy Agency saying that oil prices are set to rise, it remains to be seen whether another round of hikes in petroleum prices and the consequent hike in transportation costs will add to inflationary pressures. There are conflicting reports on the monsoon too. If inflation moderates further after the harvesting of the rabi crop, it will be good news for the economy. 

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