Costlier food items pushed the retail inflation to a 17-month high of 6.95 per cent in March, much above the upper tolerance level of the Reserve Bank, according to government data released on Tuesday.
This is the third consecutive month that the Consumer Price Index (CPI)-based inflation remained above the 6 per cent mark. The previous high at 7.61 per cent was recorded in October 2020.
The inflation in the food basket shot up to 7.68 per cent in March 2022, from 5.85 per cent in the preceding month.
Retail inflation was 5.52 per cent in March 2021, while the food inflation stood at 4.87 per cent.
The RBI's tolerance limit of retail inflation is 4 per cent with a 2 per cent margin on either side. On a quarterly basis, the retail inflation during January-March works out to be 6.34 per cent.
As per the data by the National Statistical Office (NSO), inflation in oils and fats during the month soared to 18.79 per cent as the geopolitical crisis due to the Russia-Ukraine war has fuelled edible oil prices. Ukraine is a major exporter of sunflower oil.
In vegetables, inflation quickened to 11.64 per cent in March, while in 'meat and fish' the rate of price rise stood at 9.63 compared to February 2022.
However, inflation in the 'fuel and light' category was lower at 7.52 per cent in March from 8.73 per cent in the preceding month.
Announcing the first bi-monthly monetary policy of 2022-23 last week, the Reserve Bank of India raised the retail inflation projection for the current fiscal to 5.7 per cent from an earlier forecast of 4.5 per cent. However, it expects moderation in prices of cereals and pulses on a likely record harvest of the winter season (rabi) crop.
The central bank had also said that given the excessive volatility in global crude oil prices since late February and the extreme uncertainty over the evolving geopolitical tensions, any projection of growth and inflation is fraught with risk, and is largely contingent upon future oil and commodity price developments.
"The CPI inflation shot up well beyond our expectations, touching a 17-month high...led predominantly by a sharper than anticipated surge in some components of food and beverages such as meat and fish.
"With the MPC having signalled an imminent stance change, the rate hike cycle may begin as early as June 2022, if the next CPI inflation print doesn't significantly cool off from the March 2022 level," Aditi Nayar, Chief Economist, Icra, said.
As the domestic fuel price hikes were kept on hold for the most part of March 2022, the complete transmission of global fuel prices on domestic prices is expected to be seen in April 2022 print, Vivek Rathi, (Director-Research at Knight Frank India) said.
"Furthermore, due to sustenance of inflationary pressure in the economy, as the prices of goods and services rise, the labour costs are expected to increase. The RBI has accounted for 6.3 per cent for the June quarter and hence some pressure on account of elevated inflation level is likely to continue in near future," Rathi added.
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