Inflation figure falls To 15-month low. DA hike from July may not cross 3%
India's retail inflation cooled to the lowest since December 2021 in March. It fell within the central bank's target range for the first time in three months.
The Consumer Price Index inflation stood at 5.66% in March as compared with 6.44% in February and 6.52% in January, according to data from the Ministry of Statistics and Programme Implementation on Wednesday. A panel of 25 economists polled by Bloomberg had estimated a reading of 5.7% for March.
Food and beverages inflation stood at 5.11% in March, down from 6.26% in February. Core inflation, excluding food and fuel, fell to 5.95% from 6.23% last month, according to Bloomberg.
Retail inflation has now fallen below the RBI's tolerance band of 4(+/-2)% after exceeding it in January and February this year. The central bank forecasts inflation to moderate to 5.2% for 2023-24.
The decline in March 2023 inflation was on expected lines and due to a strong base effect, which is expected to be even stronger in April 2023, said Sunil Sinha, principal economist at India Ratings and Research. The reversal of the trend of nine months of rising cereal and products inflation brings relief, he said.
While base effect played a role, sequentially as well, price pressures have lost some momentum, said Rahul Bajoria, chief economist at Barclays. Inflation easing to within the RBI’s target range in March, supports the view that the MPC is likely to stay on hold for longer, he said. "We expect April inflation to fall below 5%, raising the bar for more hikes materially."
Even the for the Central Government Employees, this figer does not impact directly, a low inflation means lower dearness allowance or DA hike.