According to a report by the Central Statistics Office (CSO), retail inflation for the month of February has touched a four-month high of 2.57% compared to 1.97% in the month of January. The rise in inflation has been attributed to the increase in prices of various consumer products including vegetables, pulses, fuel, and power.
Despite the increase, retail inflation has stayed well under the 4% medium-term target set by the Reserve Bank of India (RBI). Considering this, there is a possibility that the RBI might lower its interest rates during the next monetary policy review in a bid to boost industrial growth in the country. In February, RBI lowered its repo rate by 25 basis points for the first time in about 17 months.
For the month of January, the Index of Industry Production (IIP) slowed down significantly to a growth of 1.7% compared to 2.6% in December 2018. Industrial production growth was even lower than the 1.9% estimated by ratings agency CARE Ratings. In January 2018, industrial production growth was 7.5%.
The report noted that wholesale prices in the country increased by 2.93% in February 2019 as against 2.6% in January 2019. January recorded the lowest inflation in the last 10 months. In February 2019, wholesale prices of food articles increased to 4.84% compared to 3.54% in the previous month. On the other hand, wholesale-price based inflation for fuel and power increased to 2.23% in February as against 1.85% in the previous month.
Since the gross domestic product (GDP) and industrial production continue to remain low, many experts believe that the RBI will promote growth through another rate cut. Experts also believe that retail inflation is expected to increase even further in the coming months.
Source: Economic Times, Financial Express