Inflation in India eased to a 10-month low of 4.85 per cent in the month of March 2024, according to the data by the Ministry of Statistics and programme implementation on April 12. The Consumer Price Index (CPI) for February 2024 was 5.09 per cent.
At 4.85 per cent, the CPI is the lowest since May last year when it was at 4.31 per cent. The figure for the march as expected by the experts was supposed to be 4.91 per cent according to a Reuters survey, higher than the realized march CPI.
This inflation data was released by the ministry on April 12th, a week after the RBI announced the monetary policy. The RBI in the policy had announced the repo rate unchanged at 6.5 per cent for the seventh consecutive time.
The CPI inflation has extended to stay between RBI’s tolerance range of 2 per cent to 6 per cent for the seventh consecutive month. It has now spent 54 months in a row above the 4 per cent medium-term target.
Is Inflation under control?
Food and Beverages
The Consumer Food Price Index (CFPI) for March is 8.52 per cent lower than last month’s 8.66 per cent. For Food and Beverages, the inflation rate is 7.68 per cent.
For cereals and products, the prices were up by 8.37 per cent compared to February’s 7.60 per cent. meat and fish prices increased by 6.36 per cent higher than 5.21 per cent in February.
The only fall in food prices was in prices of oil and fats where the prices fell by 11.72 per cent. The sharpest rise in prices is 28.34 per cent in vegetables.
The prices of Fuel and Light have also reduced by 3.24 per cent in March.
There was no change in the Consumer Price Index on a month-on-month basis, but the food price index increased by 0.2 per cent. Many economists have highlighted the ongoing heat wave as the reason for food inflation. As crude oil prices are also rising and inflation spikes in the US, sticky food inflation could further dampen prospects of rate cuts from the Reserve Bank.
Aditi Nayar, Chief Economist, Head Research and Outreach, ICRA Ltd, said, “The CPI inflation moderated to 4.85% in March 2024, but exceeded our forecast of 4.7%, with food inflation softening only marginally as compared to the previous month and core inflation steady at 3.5%.
ICRA estimates the food & beverages inflation to remain above the 7.0% 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.”
India’s Inflation – ‘Elephant in the Room’
The governor of the Reserve Bank of India (RBI), Shaktikanta Das, in the monetary policy referred to inflation as ‘the elephant in the room’. During his address, Governor Das remarked, “The elephant in the room was CPI inflation. The elephant has now gone out for a walk and appears to be returning to the forest.”
The CPI inflation was a little higher than the goal of 4 percent inflation but during the address the governor highlighted the downward trajectory of inflation, showing favourable effects. He acknowledged the pressure from services prices as a key indicator for heightened levels compared to the targets.
The RBI has projected inflation at 4.9% in the April-June quarter and at 3.8% for the September quarter.
Price Data Sources
The price data are collected from selected 1114 urban Markets and 1181 villages covering all States/UTs through personal visits by field staff of the Field Operations Division of NSO, MoSPI on a weekly roster. During the month of March 2024, NSO collected prices from 99.8% villages and 98.5% of urban markets while the market-wise prices reported therein were 89.6% for rural and 93.2% for urban.
