Higher food and fuel prices push retail inflation to 5.03%

India’s retail inflation rose 5.03 per cent in February, on the back of higher food and fuel prices, data released by the National Statistical Office showed on Friday.

Food inflation jumped from 1.96 per cent in January to 3.87 per cent in February, the data showed.

Core inflation – growth in the consumer price index minus the food and fuel components – was 5.8 per cent in February as against 5.7 per cent in January.

Meanwhile, according to the Ministry of Statistics and Programme Implementation, the Index of Industrial Production – which shows the growth rates in different industry groups in a stipulated period of time – shrank 1.6 per cent year-on-year in January 2021.

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Industrial output rose by 1 per cent in December and grew by 2 per cent in January. Manufacturing sector output contracted by 2 per cent in January, while mining output was down 3.7 per cent.

Meanwhile, the Reserve Bank of India expects retail inflation at 5.2 per cent for the fourth quarter. The central bank’s Monetary Policy Committee expects GDP growth to be at 10.5 per cent in the next fiscal, lower than the projections by the Economic Survey 2021 and International Monetary Fund, according to a report on NDTV.

The RBI tracks the retail inflation – or the rate of increase in consumer prices as determined by the Consumer Price Index (CPI).

NDTV quoted Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services, as saying that rising crude prices will continue to add inflationary risks and the CPI will remain elevated. “Currently, CPI is within RBI’s target range but at the April meeting, the central bank will have to tackle with increasing inflation and rising bond yields, as cascading impact may slow India’s growth,” he said.