India’s retail inflation dipped to 6.44 % in February from three-month high of 6.52% in January, government data released on Monday showed. The price rise indicator was at 5.72% in December and 5.88% in November.
Even with the dip, February’s retail inflation continues to stay above the tolerance level of the Reserve Bank of India for the second consecutive month. The central bank aims to keep inflation between 2% and 6%. In November, inflation had settled within the RBI’s tolerance level for the first time in 2022.
The slight drop in retail inflation is mainly on the acocunt of marginal fall in prices of food and fuel items.
Food inflation, or Consumer Food Price Index, dropped marginally to 5.95% against 6.00% in January. Food prices comprise nearly 40% of the Consumer Price Index (CPI) basket.
Meanwhile, the fuel and light inflation declined to 9.90% from 10.84% in the previous month, data released by the Ministry of Statistics and Programme Implementation showed.
Among the states, Telangana and Andhra Pradesh had the highest inflation rates in the past month at 8.56% and 8.01%. Chhattisgarh, Delhi, and Himachal Pradesh had the lowest inflation rates at 2.38%, 3.64%, and 3.47%.
The rural inflation in February stood at 6.72% from 6.85% in January, while urban inflation increased to 6.10% from 6% in the previous month.
The marginal ease the retail inflation came after the Reserve Bank of India in February increased the repo rate by 25 basis points, or 0.25%, to 6.5%. The repo rate is the interest rate at which the central bank lends money to commercial banks.
Central banks typically increase key lending rates at times of high inflation in economies. Higher key lending rates translate into high interest on loans disbursed by commercial banks. This, in turn, keeps a check on discretionary spending by consumers which is expected to help them with price rises due to high inflation.
This was the sixth hike in the repo rate since May. The central bank had raised the repo rate by 35 basis points to 6.25% in December.
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