Retail inflation as measured by the consumer price index (CPI) is seen to have remained above 5% in February with prices of food items such as vegetables seen to be on the rise once again. Food items such as tomatoes and pulses have become costlier while there has also been some spike in core inflation.
“We expect CPI to settle at about 5.1% in February 2024. An elevated base would provide some degree of comfort, but if recent broad-based pressures in prices continue to persist in the coming months, it will impede the headline number from nearing the 4% target,” said Dipanwita Mazumdar, economist, Bank of Baroda, in a recent note.
High frequency price data have seen some momentum in February and March, she said, adding that for vegetables, major price correction was seen. “For onion, the gap between retail and wholesale price is still above its long run average, hence further correction to retail price cannot be ruled out. Apart from this, reports of hailstorm and rain in northern parts of India might cause supply side disruption, thus impacting prices of certain crops,” she said.
Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays, said the agency expects CPI inflation to have risen slightly to 5.3%, in February, with a modest sequential rise in food and core prices. “Price pressures largely remain in check, and food prices are coming off gradually. This should keep the RBI on the sidelines for longer, with no urgency to cut rates given robust growth,” he said.
Food inflation is forecast at 8% in February on a year-on-year basis, only partly because of a low base. “We expect food prices to rise by 0.3% month on month reversing January’s 0.6% drop,” Bajoria said.
Official data on CPI inflation for the month of February will be released on Tuesday. Retail inflation had eased to a three month low 5.1%in January from 5.69% in December as there was some cooling in prices of certain food items. Consumer food price index based inflation was at 8.3% in January versus 9.53% in December.
The rise in prices of food items such as tomatoes was also evident from Crisil’s Roti Rice rate, which is a monthly indicator of food plate cost. “On-year, the cost of the representative home-cooked veg thali rose 7% in February, while that of the non-veg thali declined 9%,” as per CRISIL MI&A Research estimates. The cost of the veg thali increased due to a surge of 29% and 38% on-year in prices of onion and tomato, respectively, it had said.
The decrease in the cost of the non-veg thali was due to a decline of about 20% on-year in broiler prices on a high base of last fiscal, it had said.
The RBI has pegged CPI inflation at 5.4 per cent for 2023-24 with fourth quarter at 5% per cent.
