Priyanka Tiwari
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India’s wholesale inflation rose to 2.38% in February, slightly up from 2.3% in January. The increase was driven by higher manufacturing costs, which make up nearly two-thirds of the index. This rise offset the decline in food prices, which had kept overall inflation in check.
Retail Inflation at a Seven-Month Low
In contrast, retail inflation declined further, dropping to 3.6%, the lowest level in seven months. Food prices, a key driver of retail inflation, hit their lowest level in 21 months. This helped bring down overall consumer price pressures despite the rise in manufacturing costs.
Core Inflation Accelerates
Core inflation, which excludes food and fuel, rose at its fastest pace in seven months. This indicates that input costs for manufacturers are increasing, which could impact future pricing strategies.
Inflation Trends and Future Outlook
Analysts expect wholesale inflation to remain around current levels in the coming months. The Purchasing Managers’ Index (PMI), released on March 3, signaled rising input cost pressures. These costs are being passed on to consumers, driven by stronger demand in the economy.
On a positive note, crude oil prices staying below $80 per barrel could help ease inflationary pressures going forward.
RBI’s Rate Cut Expectations in April
The fall in consumer inflation has increased the chances of another rate cut by the Reserve Bank of India’s Monetary Policy Committee (MPC). In February, the RBI reduced the repo rate by 25 basis points (bps)—the first rate cut in five years—as inflation was projected to fall to 4%, the RBI’s target.
Experts predict the policy rate will drop to 6% in April with another 25 bps cut. However, the rate-cut cycle is expected to be limited, with the RBI unlikely to push rates below 5.75%.
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