Retail inflation in March nears 7 per cent

New Delhi: Signalling a sustained rise of food prices, India's retail inflation accelerated to 6.95 per cent in March from 6.07 per cent in the previous month, the highest in 17 months, while the country's industrial growth, as per the Index of Industrial Production (IIP), edged up to 1.7 per cent in February from 1.5 per cent in January, the government data showed on Tuesday.

The sudden spike of overall inflation, measured by the Consumer Price Index or CPI, has clocked above the Reserve Bank of India's upper end of the tolerance band for the third straight month in a row.

"One of the major reasons for the spike is the food inflation, which jumped to 7.68 per cent in the reporting month as compared to 5.85 per cent in February. The food prices, which account for nearly half the inflation basket, remained elevated as supply chain problems related to the Russia-Ukraine war disrupt global grain production, supply of edible oils and fertiliser exports," the government said.

As the data, the prices of palm oil, the world's most consumed vegetable oil, surged nearly 50 per cent this year. "Food price rises are sharply felt by millions living below the poverty line who have already taken a hit on jobs and incomes due to the pandemic," it said.

Last week, the central bank also surprised markets, warning that it now prioritises tackling inflation over supporting economic growth, shifting gears after more than two years. Governor Shaktikanta Das also signalled that they would focus on withdrawing accommodative policies, while introducing a new 3.75 per cent standing deposit facility rate to soak up excess cash from lenders. The policy decision, however, effectively kicked off a tightening cycle to tackle inflation, which the RBI sees at 5.7 per cent in the current fiscal year, against a 4.5 per cent forecast earlier.

However, analysts fear that with such hike in overall inflation, not only in food prices but also in global fuel prices, would be reflected in the April 2022 numbers.

"The March 2022 headline inflation was driven both by food and fuel prices....As the domestic fuel price hikes were kept on hold for most part of March 2022, the complete transmission of global fuel prices on domestic prices is expected to be seen in April 2022 print," said Vivek Rathi, director-research at Knight Frank India.

Meanwhile, industrial growth, as per the Index of Industrial Production (IIP), edged up to 1.7 per cent in February from 1.5 per cent in January. The IIP growth had slumped to a 10-month low of 0.4 per cent in December last year, data released by the National Statistical Office showed.

As per the data, the IIP for mining, manufacturing and electricity sectors for February stood at 123.2, 130.8 and 160.8, respectively.