India’s retail inflation reading for February’23 yet again was above the RBI upper tolerance range. The headline inflation prints for the month came in at 6.4% (YoY). On a sequential basis, retail inflation rose 0.2% as against the 0.5% increase of the preceding month.

While there has been a broad-based increase in prices across the various segments of the consumer prices index (CPI) in February’23 from a year ago, the driver of overall headline inflation remained the food and services segment. Core inflation remained sticky above 6%, indicative of the pervasive nature of price pressures. This also reflects the price rises being undertaken by various service providers. Core inflation has been around/ above the RBI target range for overall inflation (6%) since May’21.  

Rural and urban inflation inched up in February ’23 on an annual and monthly basis. However, rural inflation continued to rule above urban inflation. Point to point rate of inflation based on the CPI-AL and CPI-RL stood at 6.94% & 6.87% in February 2023 compared to 6.85% & 6.88% respectively in January 2023 and 5.59% and 5.94% respectively during the corresponding month of previous year. Similarly, the Food inflation stood at 6.82% & 6.68% in February 2023 compared to 6.61% & 6.47% respectively in January 2023 and 4.48% & 4.45% respectively during the corresponding month of the previous year.

Moving forward, the inflation trajectory largely depends on the prices of domestic commodities like vegetables, cereals, spices, etc. Earlier, the RBI had blamed the effects of the pandemic, the geopolitical conflict, and the weakness in the Indian rupee manifesting in the demand-supply mismatch of goods and services, leading to downside risks to growth.