JOIN USHigher food and fuel prices sent India’s headline inflation soaring in February after a decline last month, but a comfortable ease in manufacturing inflation kept alive hope of a rate cut by the Reserve Bank of India in its mid-quarter review next week.
The wholesale price index rose 6.84 per cent in February from 6.62 per cent last month, which was a three-year low.
Core inflation, measured in terms of non-food manufacturing prices, eased to to 3.8 per cent, lowest in three years.
RBI closely watches core inflation during policy review. Core inflation was 4.12 per cent in January and 4.24 per cent in December. A slowing core inflation, however, was seen by analysts as a sign of weak economic momentum.
Inflation in food articles, which has over 14 per cent share in the WPI basket, though witnessed a decline at 11.38 per cent, it still remained on a higher side. Inflation in the food articles category was at 11.88 per cent in January. Inflation in wheat and cereals too remained high.
In the vegetable segment, onions were costlier in February than in January, but prices of potato and pulses eased.
Fuel prices rose 10.47 per cent, faster than 7.06 per cent in January. Manufacturing goods inflation dropped to 4.51 percent in February from 4.81 percent a month ago.
Prime Minister's Economic Advisory Council Chairman C Rangarajan said that the RBI will take into account the decline in inflation in case of non-food article group in its review. "Clearly the decline in manufacturing inflation is the critical number that monetary authorities look at. Therefore, there is comfort in that direction," Rangarajan said.
FICCI President Naina Lal Kidwai said, “The deregulation of diesel prices is likely to further exert an upward pressure in the near term, albeit removal of the subsidies continues to be important.”