Easing onion and potato prices pulled retail inflation in February to a 25-month low of 8.1 per cent and is likely to increase the clamour for the Reserve Bank of India (RBI) to cut interest rates in its next monetary policy.
Overall inflation in the food basket, including beverages, slowed to 8.57 per cent in February from 9.9 per cent in the previous month, according to Consumer Price Index (CPI) data released by the government today.
The rate at which vegetable prices increased eased to 14.04 per cent as against 21.91 per cent in January.
Prior to the month under review, the lowest CPI was recorded in January 2012 at 7.65 per cent, which inched up to 8.83 per cent in the following month. Retail inflation was at 8.79 per cent in January.
Retail or consumer inflation also slowed in protein-rich items such as eggs, fish and meat to 9.69 per cent in February versus 11.69 per cent in January.
The rate of price rise slowed to 9.93 per cent for cereals and related products from 11.42 per cent in January.
However, the pace of price increases for milk and its products picked up in February to 10.37 per cent from 9.82 per cent in the previous month.
The prices of fruits, condiments and spices also rose faster last month.
The RBI, which has maintained a hawkish interest rate regime to tame inflation, is scheduled to announce the next monetary policy on April 1. Industry has been demanding a cut in interest rates to boost economic growth, which has slowed to a decade-low level.
Retail inflation has been easing for three months. The CPI data showed inflation rates for rural and urban areas were at 8.51 per cent and 7.55 per cent, respectively.
In January, the wholesale price inflation rate fell to an eight-month low. Wholesale inflation data for February will be out on Friday.
UPASNA BHARDWAJ, ECONOMIST, ING VYSYA BANK, MUMBAI
"Marginal pick up in industrial production along with a 20 basis point easing in core inflation provides some hopes of stabilisation in the macro space. However, we do not see this data affecting RBI's policy decision of maintaining a status quo next month."
A. PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP LTD, MUMBAI
"The trend to look at is the core CPI. This time core has come off. And if you look at the components also, it looks like housing inflation is