Headline retail inflation for February is estimated to have climbed further, largely due to the food and beverages segment, economists said. Consumer Price Index (CPI) inflation may have been at 3.11% year-on-year in February, up from 2.75% in January and 1.15% in December, according to the median of an FE poll of economists.
This would mean the key inflation figure might have stayed below the Reserve Bank of India’s (RBI) medium-term target of 4% for the 13th consecutive month.
The February inflation print will be only the second reading under the new 2024 base series. The Ministry of Statistics and Programme Implementation is set to release the official data for February on Thursday. The estimates for February retail inflation ranged from 3% to 3.3% in a poll of eight economists.
What do Economists say?
Radhika Rao, Senior Economist at DBS Bank, Singapore, expects headline retail inflation to rise further to 3.1% y-o-y in February, as “the pace of disinflation in food (including vegetables, pulses, etc.) continues to ease, while precious metal price pressures remain firm.”
Economists projected food inflation in the range of 2.3% to 3.3% y-o-y in February. Although the weight of food and beverages in the CPI basket has declined to 36.75% in the 2024 series from 45.86% in the 2012 series, it remains a dominant factor. In January, food inflation stood at 2.13% y-o-y.
Aditi Nayar, Chief Economist at Icra, sees an uptick in headline inflation to 3.2% y-o-y, largely expected to be driven by food and beverages. A narrowing deflation in vegetables and pulses is seen, even as inflation in the non-food and beverages segment is unlikely to rise materially from January to February.
Sakshi Gupta, Principal Economist at HDFC Bank, expects CPI inflation at 3.1% in February, primarily due to an unfavourable base effect. “The momentum in headline CPI is expected to moderate with easing in both food and core baskets. Within the food basket, major support comes from vegetable prices, which are expected to remain in the negative zone,” Gupta said.
Core Inflation
Core inflation, which excludes food and fuel, is projected in the range of 3% to 3.5% in February. Rao noted that core inflation is trending at a more benign level under the new series than the old one, due to subdued run-rates in housing, health, and personal care categories (double-digit rises but slower than in the old series).
“Inflation numbers are unlikely to trouble policymakers, with the focus instead on improving policy transmission and maintaining financial market stability amid global geopolitical risks,” Rao said.
In February, the RBI projected CPI inflation for FY26 at 2.1%, up from its previous estimate of 2%. For Q4, the RBI projected headline retail inflation at 3.2%, up from the earlier projection of 2.9%.