February WPI inflation at nine-month low

February WPI inflation at  nine-month low

Driven by an ease in food and fuel costs, the wholesale price inflation came down to a nine-month low of 4.68 per cent in February but rising risk of El Nino and its possible impact on farm sector have heightened fears of food prices spiking again.

The food inflation dropped to 8.12 per cent in February, compared with 8.8 per cent in the previous month while vegetable prices dropped by 10 per cent since January. The drop in wholesale food prices has come close on the heels of retail inflation dropping to a little above 8 per cent in February.

This was the last of the set of macroeconomic data before the Reserve Bank of India comes out with the monetary policy review on April one. 

Although the numbers give much headroom to the RBI to cut interest rates, analysts said that the central bank may tread  with caution as the December headline numbers were revised upward and core inflation for February inched up. Core inflation moved to 3.15 per cent from 3 per cent in January.

“Even with tepid growth and falling inflation, the RBI is unlikely to lose its focus on managing inflation expectations,” analysts at Barclays wrote in a note after the data.There is also a possibility of food prices spiking in the coming months as unseasonal rains and mid-march snowfall in parts of India have damaged crops and vegetables.

Global weather forecasting agencies have predicted a possible adverse impact of El Nino on the country's south-western monsoons though the Met department is yet to come out with its forecast.

February inflation in fruits, milk and other protein-rich items such as egg, fish and meat remained high  compared with the previous month.

Industry however has raised its pitch for a rate hike with the CII saying, “The RBI should make a shift towards a more accommodative monetary policy stance to revive investment and propel demand especially as investment demand is declining and consumer durables are in the red”.

Ficci said, “This easing of inflation will hopefully create some space for monetary policy easing by the RBI.”

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