February inflation remains steady at 5.1% but food inflation up

New Delhi: Consumer Price Index (CPI)-based inflation was down by one basis point to 5.09% in February, compared to 5.1% in January 2024, data from the statistics ministry issued Tuesday revealed.

February inflation remained stagnant, above the central bank’s target of 4%, but within its tolerance range of 2-6% for the sixth consecutive month. Prices of food and beverages continued to rise – above 7% for four months in a row – owing to rise in prices of eggs, meat and fish and vegetables, but other primary categories like clothing, footwear, housing and transport eased marginally.

In February 2023, inflation was a notch higher than the upper tolerance band, at 6.44%. Inflation stood at 5.5% in November 2023, up from 4.87% in October and 5.02% in September.

Core-CPI, which excludes food and beverages, fuel and light and petrol and diesel for vehicles, eased to 3.5% in February, from 3.7% the month before. This, some experts said, was the lowest reading since January 2015.

Food inflation, measured by the Consumer Food Price Index, which accounts for nearly half of the overall consumer price basket, rose to 8.66% in February 2024, up from 8.3% in January, but easing from 9.53% in December 2023.

In the prior months, high inflation levels had prompted the government to take supply-side measures such as releasing substantial cereal stocks from reserves while proactively managing the imports and exports of pulses to ensure supplies. The government had also restricted exports of rice and sugar to tame inflation. However, no such measures have been taken since January.

The Reserve Bank of India (RBI) also kept policy rates the same with repo rates at 6.5%, fourth time in a row. Regulating interest rates is a key instrument for the central bank to control inflation.

“Weak core inflation at a time of strong growth is a conundrum, the only reason could be the weak input price growth (WPI inflation has been weak). We expect March 2024 inflation at 5.2%, mainly due to base effect,” said Sunil Kumar Sinha principal economist at India Ratings and Research.

ICRA estimates headline CPI inflation to dip to sub-5% in March 2024 led by a dip in the fuel and light amid the cut in LPG prices. Food inflation is likely to remain elevated above the 7% mark.