Retail inflation continued to ease in March on lower food and fuel prices and a fall in demand for non-essential items amid a nationwide lockdown to combat the coronavirus pandemic.
The Consumer Price Index-based inflation stood at 5.91 percent in March compared with 6.58 percent in February, according to data released by the Ministry of Statistics and Program Implementation on Monday. That's the lowest since December. A Bloomberg poll of 31 economists had pegged inflation at 5.9 percent for March.
Retail inflation fell below the Monetary Policy Committee's targeted upper band of 6 percent for the first time since November 2019.
The drop was led by continued easing in vegetable prices. Vegetables inflation stood at 18.63 percent in March against 31.61 percent in February.
- Inflation in food and beverages eased to 7.82 percent from 9.45 percent in February.
- Agricultural commodities continued to see supply-side disruptions amid the lockdown.
- While inflation in fuel and light rose in March, it is expected to fall in April because of low demand, along with a deflationary pressure on prices of non-essential items.
To be sure, the ministry, in a press statement, clarified that the field work for price collection of CPI was suspended with effect from March 19, 2020, in view of the preventive measures taken by the NSO and a nationwide lockdown. “Till then, about 66 percent of price quotations were received. The remaining quotations were assessed on the basis of well-established and internationally accepted methodology and practices.”
Rahul Bajoria, chief India economist at Barclays, said from a statistical perspective, data collection agencies had encountered difficulties in collecting the price quotations from all centers, making larges revisions a possibility. The inflation's trajectory over the next few months, he said, will be influenced significantly by Covid-19 related supply disruptions.
Inflation Internals
- Inflation in fuel and light eased to 6.59 percent in March from 6.36 percent in February.
- Clothing and footwear inflation stood at 2.11 percent compared with 2.05 percent in February.
- Inflation in housing stood at 4.23 percent in March compared with 4.24 percent in the preceding month.
- Household goods and services inflation stood at 1.81 percent against 1.88 percent in February.
- Health inflation stood at 4.17 percent against 4.19 percent.
- Inflation in recreation and amusement stood at 4.36 percent against 4.45 percent in February.
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