Inflation eases to 9-month low of 4.85% in March

New Delhi: India’s headline retail inflation eased to a nine-month low of 4.85 per cent in March from 5.09 per cent in the previous month helped by moderation in price rise of food items, providing a good narrative for the Modi government in the election season.

During March 2024, urban consumers saw a steeper decline in the rate of price rise, while rural consumers continued to suffer. Urban Consumer Price-Index based inflation declined to 4.14 per cent in March from 4.78 per cent in the previous month.

However, retail inflation in rural areas rose to 5.45 per cent in March from 5.34 per cent recorded in Feb, as per data released by the National Statistical Office (NSO) on Friday. This, in a way, justifies the Reserve Bank of India’s decision to keep interest rates unchanged.

CPI inflation stood at 5.66 per cent in March 2023. March 2024 CPI print is the lowest since June 2023 when it came at 4.81per cent. Food inflation declined marginally to 8.52 per cent in March from 8.66 per cent in the previous month. It stood at 4.79 per cent in March 2023.

“The headline inflation for March has come in line with expectations. While core inflation continues to moderate, we remain wary of the heatwaves going ahead which could keep food inflation elevated and volatile in the summer months,” said Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.

The CPI retail inflation has been within the RBI tolerance range of 2-6 per cent for the sixth month in a row. However, it has been above the central bank’s medium-term target of 4 per cent for 53 consecutive months.

The RBI monetary policy committee earlier this month kept interest rates unchanged, reiterating its commitment to bring inflation to 4 per cent target on a durable basis.

“We expect the MPC to remain on a wait and watch mode until Sept 2024, with possible easing likely towards the latter part of FY25 depending on the evolution of monsoons, crude oil prices and timing of Fed’s rate easing cycle,” said Bhardwaj.

Inflation in vegetables eased marginally but remained elevated. The price of vegetables in March 2024 was 28.34 per cent higher when compared with the same month last year. Price of cereals was 8.37 per cent higher while pulses became costlier by 17.71per cent year-on-year. However, oils and fats became cheaper by 11.72 per cent in March year-on-year.

According to rating agency ICRA, food and beverages inflation is likely to remain above the 7 per cent mark in April 2024. “An intensification of the impending heatwave may worsen the seasonal uptick in prices of perishables, heightening the criticality of a favourable monsoon in 2024 to keep food inflation in check and inflationary expectations well-anchored,” said Aditi Nayar, Chief Economist at ICRA.