Retail inflation falls to a 15-month low of 5.66% in March

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  • The inflation rate in March is within the comfort zone of the RBI as it is below 6%.
  • According to the National Bureau of Statistics, inflation in the food basket was 4.79% in March.
  • The retail inflation increased to 6.4% in February 2023 due to the inflation of cereals, milk, fruits and a slower deflation of vegetable prices.


Retail inflation fell to a 15-month low of 5.66% in March, mainly due to a fall in food prices, government data showed on Wednesday. The inflation rate in March is within the comfort zone of the RBI as it is below 6%.

Retail inflation based on the consumer price index (CPI) was 6.44% in February 2023 and 6.95% in the same period a year ago. Retail inflation increased from 5.7% in December 2022 to 6.4% in February 2023 on the back of higher inflation for cereals, milk and fruit and slower deflation in vegetable prices.

According to the National Bureau of Statistics (NSO), inflation in the food basket was 4.79% in March, up from 5.95% in February and 7.68% in the same period a year ago.

“Inflation for grains (mainly wheat) and milk has pushed inflation up, while negative growth for vegetables and edible oils has pushed inflation down. Fruit and spices also experienced strong increases of 7.6% and 18.2% respectively. This trend will continue in the coming months as wheat prices are expected to rise in case there is a shortfall in production this season,” said Madan Sabnavis, chief economist at Bank of Baroda.

All major categories registered more than 5%, with the highest being fuel and light at 8.9% and clothing and footwear at 8.2%. Clothing inflation is higher due to higher costs for cotton and man-made fibers, along with energy costs. Fuel and lighting costs have increased, mainly due to the increase in LPG prices, which have been called upon by the government.

“The diverse category that dominates the core inflation segment saw inflation of 5.8% driven by household items, health and personal care. Higher gold prices have contributed to this rise in inflation here, as has the tendency for companies to pass on higher input costs to consumers,” added Sabnavis.

The Reserve Bank of India has projected CPI inflation at 5.2% for FY24, with 5.1% in Q1, 5.4% in Q2, 5.4% in Q3 and 5.2% in Q4, and the risks are balanced.

“Price pressure on the non-food and fuel categories remains persistent. Price growth in categories such as clothing, household goods and services, etc. remained high. So this affects household disposable income, reducing their spending power,” said Vivek Rathi, director of research at Knight Frank India.

Rathi also believes that even if wholesale prices fell, the producers are unlikely to survive this price cut to maintain their profit margins. “There are multiple factors that are depressing consumer inflation and are likely to persist at least over the medium term,” he added.

Industrial production up 5.6% in February

According to official data released on Wednesday, India’s industrial production increased by 5.6% in February this fiscal year. Factory output measured in terms of the Index of Industrial Production (IIP) grew by 1.2% in February 2022.

Data released by the NSO showed that manufacturing sector output increased by 5.3% in February 2023.
Mining output increased 4.6% and electricity generation increased 8.2% during the month under review.

(with PTI inputs)