India's Retail Inflation Holds Steady At 5.09 Per Cent In February, Industrial Production Grows 3.8 Per Cent

India's retail inflation slightly eased to 5.09 per cent year-on-year in February, compared to 5.10 per cent in the previous month, according to data released by the Ministry of Statistics & Programme Implementation.

A Reuters poll of 42 economists had forecasted a decrease to 5.02 per cent as per a report by The Economic Times.

The inflation rate has remained within the Reserve Bank of India's (RBI) tolerance band of 2 to 6 per cent. Sequentially, the inflation rate rose to 0.16 percent from a contraction of (-)0.11 percent in the previous month.

Rural inflation remained unchanged at 5.34 per cent, while urban inflation declined to 4.78 per cent from 4.92 per cent in January. Food inflation for February stood at 8.66 percent, compared to 8.30 per cent in January.

Vegetable inflation surged to 30.25 per cent from 27.03 per cent in January. However, fuel and light inflation witnessed a contraction of (-)0.77 percent compared to (-)0.60 percent in January.

India's industrial production grew 3.8 percent in January 2024, according to data from the Ministry of Statistics and Programme Implementation.

The manufacturing sector's output grew 3.2 per cent in January 2024, down from 4.5 percent a year ago.

Mining production rose 5.9 per cent, and power output increased by 5.6 per cent in January.

For the period of April 2023 to January 2024, the Index of Industrial Production (IIP) grew by 5.9 per cent, compared to 5.5 per cent in the same period last year.

The RBI, which maintained its repo rate at 6.50 per cent for the sixth consecutive meeting on 8 February, highlighted "large and repetitive food price shocks" as one of the biggest risks to the ongoing disinflation trend.

In its February meeting, the RBI Monetary Policy Committee (MPC) kept its inflation forecast for FY24 unchanged at 5.4 per cent, despite concerns about rising food prices, uncertainty around crude oil costs, and potential demand pressure on inflation from domestic growth momentum.

RBI Governor Shaktikanta Das mentioned that food price inflation continued to cause considerable volatility in the inflation trajectory.

He also noted that the deflation in CPI fuel had deepened, and core inflation (CPI inflation excluding food and fuel) had moderated to a four-year low of 3.8 percent in December.

Geopolitical events impacting supply chains, volatility in international financial markets, and commodity prices are key sources of upward risks to inflation, according to the same report.

The RBI expects inflation to be 5 per cent in the current quarter ending 31 March.

For Q1FY25, Q2FY25, Q3FY25, and Q4FY25, the inflation readings were projected at 5 per cent, 4 per cent, 4.6 per cent, and 4.7 per cent, respectively, assuming a normal monsoon next year.

RBI Governor Das reiterated that the RBI is committed to bringing down inflation to 4 per cent.

He emphasised that the RBI considers various factors beyond just inflation when shaping policies, while noting that headline inflation remains vulnerable to recurring shocks from overseas and domestic factors.

Indian policymakers have been working to control inflation through a combination of monetary and fiscal interventions, including rate adjustments and export curbs.