Inflation rises again as food prices go up

After a temporary respite in January, retail price inflation surged again in February as food prices went up. Consumer price inflation (CPI) moved up to 3.65% in February from 3.17% in January. Food items have 46% weight in the CPI basket.

But vegetable prices showed a declining trend majorly due to the demonetisation-induced distress sale of vegetables, in addition to seasonal factors. Vegetable price inflation at retail level was recorded at 8.29% in February.

The Reserve Bank of India said it was possible that with significant remonetisation having taken place, there could be some reversal in vegetable prices in March and beyond.
Price rise in fruit was higher at 8.33% and in fuel at 3.9% in February. The rate of price rise in meat and fish was 3.5%.

Prices of sugar and confectionery items in the food basket rose by 18.83%. Inflation in milk and milk products too increased by 4.22%.

Prices of housing, health, education, transport and communication which together account for over 30% of the CPI basket remained high, implying that the discretionary consumer spending continued to be affected by demonetisation.

In the case of pulses, a record production of kharif pulses at 8.7 million tonnes, after two consecutive years of monsoon and crop failures, helped in sharp reduction in prices – prices crashed even below the minimum support prices (MSPs) in some mandis.