India’s February retail inflation holds steady at 5.09%

Headline retail inflation has now surpassed the Reserve Bank of India’s medium-term target of 4% for 53 straight months.

India’s headline retail inflation rate remained steady at 5.09 percent in February, according to data released by the Ministry of Statistics and Programme Implementation on March 12. 

This figure was marginally lower than January’s Consumer Price Index (CPI) inflation print of 5.10 percent.

As Expected by Economists

The latest inflation figure aligns with economists’ expectations, with a Moneycontrol survey predicting a year-on-year price rise of 5.1 percent.

Consistent Stay within RBI Tolerance Range

CPI inflation has now remained within the Reserve Bank of India’s (RBI) tolerance range of 2 percent to 6 percent for a sixth consecutive month. However, it has exceeded the medium-term target of 4 percent for 53 consecutive months.

Upcoming RBI MPC Meeting

The release of the inflation data precedes the RBI’s Monetary Policy Committee (MPC) meeting scheduled for April 3-5. In its February meeting, the MPC maintained the policy repo rate at 6.5 percent for the sixth consecutive session.

RBI’s Inflation Forecast

The RBI’s latest forecast anticipates CPI inflation to be at 5.0 percent in the current quarter before easing to 4.0 percent in July-September. However, it is projected to increase to 4.7 percent in the first quarter of 2025.

Policy Rates and Economic Growth

India’s policy rates are currently at their highest level in almost eight years. Despite this, economists believe that the economy’s better-than-expected growth performance may prompt the MPC to adopt a cautious approach to ensure inflation stabilizes at acceptable levels over the long term.

Expectations for April Meeting

Aditi Nayar, chief economist at ICRA, suggests that the recent upward revision in GDP growth estimates, coupled with consistent robust GDP expansion and the CPI print of 5.1 percent for February 2024, indicate a likelihood of maintaining the status quo on rates and stance in the upcoming April meeting.