India's Retail Inflation Eases To 6.44%; Stays Above RBI's Tolerance Level

India's Consumer Price Index (CPI) or retail inflation eased to 6.44 per cent in February but continued to exceed the Reserve Bank of India's (RBI) tolerance level for the second consecutive month, said the data released by Ministry of Statistics & Programme Implementation (MoSPI) on Monday.

For the second month in a row, the CPI inflation rate exceeded the RBI's tolerance range of 2 to 6 per cent. Retail inflation reached a three-month high of 6.52 per cent in January.

The CPI inflation rate in India was 5.72 per cent in December and 5.88 per cent in November.

Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities said “February CPI inflation at 6.44 per cent while elevated is broadly in line with expectations. Cereals and milk inflation continues to be high while fruits inflation spiked up too in February. However, we see food inflation softening in March based on recent price trends.

He further said that Core inflation at 6.1 per cent remains elevated and sticky with relatively high inflation across clothing and footwear, health, personal care and effects, and household goods/services. The RBI will remain hawkish in the April policy as inflation prints have spiked back over 6 per cent in January-February along with core inflation remaining sticky above 6 per cent. We continue to expect a 25 bps repo rate hike in the April policy.

Inflation in the food basket last month stayed at 5.95 per cent, down from 5.94 per cent in January. Almost 40 per cent of the basket of the Consumer Price Index (CPI) is made up of food prices.

While urban inflation was 6.10 per cent in February, rural inflation was 6.72 per cent.