Food Price Inflation: According to data released by the Ministry of Statistics and Program perpetration, India’s caption retail affectation rate dipped to 6.44% in February from a three-month high of 6.52% in January. The most recent reading of the Consumer Price Index( CPI) shows inflation which is, harmonious with consensus estimates at 6.44%. Economists in a survey prognosticated that inflation would fall to 6.4% in February. Retail inflation has now been above the medium-term target of 4 set by the Reserve Bank of India( RBI) for 41 months in a row. Retail inflation fell by eight base points in January, surpassing prospects to reach 6.52%. Read More Business News on our website.
Simply reported on March 9 that a revision in the methodology as a result of the distribution of free grain through the Public Distribution System; caused the sharp rise in January CPI inflation from 5.72% in December.
Will Food Price Inflation Affect Your Wallet?
Food inflation, dropped slightly in February, falling to 5.95% from 6% the month before. Eggs, vegetables, edible oils, meat, and fish saw the largest diminishments in food inflation, with the CPI indicator for these groups knocking down by 5.7%,2.5%, 1.7%, and 1.6%, respectively, month over month. Withal, the index for fruits increased successionally by 3.3%, while the index for cereals increased by 0.9% following a 2.6% increase in January.
Economists were taken aback in January by the unforeseen rise in the cereal index. They refocused that a manual computation of the same number using the 20 individual factors of the” cereals and products” subgroup revealed a much lower increase, performing in a caption CPI inflation rate that was 20- 35 base points lower than 6.52%. The Statistics Ministry, on the other hand, stood by its estimates.
In addition, it was reported that the government’s provision of free food grain through the Public Distribution System( PDS) under the National Food Security Act was the cause of the unexpected rise. Free social transfers in kind, similar to free goods and services handed by governments to households, aren’t included in the CPI, according to a methodology that’s extensively accepted worldwide. As a result, the weight of PDS rice and PDS wheat/ atta, which regard for 0.54 percent of the CPI basket, was reduced to zero and distributed proportionally to other food group particulars.
What RBI Says?
This month’s inflation reading of 6.4 marks the second time in a row that it has exceeded the RBI’s commanded target range of 6. This brings the normal for January and February to 6.5 percent, compared to the 5.7 percent that the central bank anticipated for the current quarter. It’s unclear how the rate-setting panel will treat the higher inflation prints caused by the statistical effect due to the change in computation methodology on account of the free PDS food grain. Even though it piles pressure on the Reserve Bank of India’s Monetary Policy Committee( MPC) to deliver another repo rate hike in early April.
The MPC has also emphasized core inflation at recent meetings, stating that it was pivotal to end its continuity.
Further studies and analytics indicate that the repo rate will be raised at the beginning of April. However, the rate-setting panel’s treatment of the advanced inflation prints brought about by the statistical effect is unclear due to a change in the calculation methodology brought about by the free PDS food grain.
The MPC has also emphasized core inflation at recent meetings, stating that it was pivotal to end its continuity. Further, the core CPI inflection in February was 6.1%, little changed from January. The data was released on March 13. The MPC is listed to meet between April 3 and 6. The repo rate was raised by 25 base points to 6.5% utmost present. Also, read other interesting news on Industrial Front to increase your knowledge.