Retail inflation rises in March, food prices soar

Retail inflation rises in March, food prices soar

New Delhi, April 12, 2021

India's retail inflation marginally rose in March as the Consumer Price Index (CPI) increased to 5.52 per cent from 5.03 per cent in February.

Data furnished by the National Statistical Office (NSO) showed that CPI Urban rose 0.26 per cent in March, whereas the CPI Rural remained static.

As per the National Statistical Office's data, Consumer Food Price Index increased to 4.94 per cent in March from a rise of 3.87 per cent in February.

Rising retail cost was a major factor in the Reserve Bank of India's recent decision to keep the repo rate on hold, as low lending rates can potentially stroke inflation.

The RBI's MPC in its bi-monthly monetary policy meet in April kept its key interest rates unchanged and decided to maintain its accommodative monetary policy stance to support growth amid the pandemic.

In terms of CPI YoY inflation rate, the prices of pulses jumped by 60.50 per cent and 15.44 per cent, respectively in December 2019.

Furthermore, meat and fish prices rose 15.09 per cent, eggs became dearer by 10.60 per cent and the overall price of food and beverages category was up 5.24 per cent.

However, vegetable prices declined by (-) 4.83 per cent.

Besides, the official data, the inflation rate for fuel and light was at 4.50 per cent.

"The continued sharp rise in the CPI inflation broadly tracked our expectation, with a base-effect led jump in the food inflation, as well as a further measured uptick in the core inflation to an unnerving 6 per cent in March 2021," said Aditi Nayar, Chief Economist, ICRA.

"Despite a month-on-month decline in food prices, driven by vegetables, egg, spices, cereals and sugar, the inflation for food and beverages hardened to 5.2 per cent in March 2021 on account of the base effect. A reversal of the base effect, as well as the decline in prices of vegetables such as onions, is expected to dampen the food inflation to around 2-2.5 per cent in April 2021."

According to Devendra Kumar Pant, Chief Economist, India Ratings and Research: "Retail inflation increased to four months high of 5.52 per cent in March 2021. Spurt in retail inflation mainly originated from higher food inflation, which increased to 4.94 per cent in March 2021 from 3.87 per cent in February 2021."

"Weakening of base effect in March 2021 contributed to higher food inflation. Core inflation jumped to 29 months high of 5.96 per cent in March 2021 due to demand and increase in commodity prices."


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