Retail inflation soared in February on the back of stubborn food prices sustaining pressure on consumers and complicating the policy choice for the central bank.
Data released by the Central Statistics Office (CSO) showed the inflation rate based on all-India general CPI (consumer price index) for February was 10.91% compared to 10.79% for the previous month. The inflation rates for rural and urban areas for February were 11.01% and 10.84%.
This is the third consecutive month when retail inflation has remained in double digits. The data showed that cereal prices rose an annual 17.04% in February, while pulses and products shot up 12.39% year-on-year. Eggs, meat and fish rose 15.72%, while vegetable prices shot up an annual 21.29%. Prices of fruit and sugar also increased in double digits, while overall food and beverages rose 13.73% in February. Food accounts for a larger share in the CPI basket.
Economists said they expect the Reserve Bank of India to cut interest rates when it reviews monetary policy as the central bank would be keen to support growth.
The widely watched WPI (wholesale price index) inflation has moderated in recent months and economists have said that the only way to tackle food inflation is to raise supplies. WPI inflation has moderated to 6.62% in January after remaining sticky for several months.
Growth is estimated to have slowed to a decade low of 5% but the finance ministry says it is expected to be closer to 6% in 2012-13 and gather momentum next year.
Food inflation has remained a policy challenge for the government and RBI but economists say that monetary policy has little impact on taming food inflation.
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