March Retail Inflation Hits 4-Month Low Of 5.91% On Lower Food Prices

Consumer inflation for the month of March slowed to 5.91 per cent, mainly on back of easing food prices, government data showed on Monday. The latest reading was in line with economists' expectations, but marked a sixth month in which retail inflation remained much worse than the Reserve Bank of India's medium-term target of 4 per cent. Some economists say consumer inflation - which is tracked primarily by the RBI for formulating its monetary policy - might not remain the driver of policy in view of the rapidly-spreading coronavirus pandemic.

Economists in a poll by news agency Reuters had expected consumer inflation to be at 5.93 per cent in March. Retail inflation - or the rate of increase in consumer prices determined by the Consumer Price Index (CPI) - had stood at 6.58 per cent in February 2020, and at 2.86 per cent in March last year.

The National Statistical Office (NSO) said the data for calculating the inflation was collected only till March 19, 2020 due to the COVID-19 outbreak.

"Keeping in view the preventive measures taken by NSO and announcement of nation-wide lockdown by the Government to check spread of COVID-19 pandemic, the field work for price collection of Consumer Price Index (CPI) was suspended with effect from 19th March, 2020 and about 66 per cent of price quotations were received," the statistics department said.

The inflation in the food basket was 8.76 per cent in March 2020, lower from 10.81 per cent in the previous month, according to the official data.

Speaking to news agency Reuters, economists said that softening prices could encourage RBI to ease interest rates in addition to other measures to support businesses hit by the national lockdown to combat the coronavirus outbreak.

"Retail inflation could slow further and give the RBI more scope to cut interest rates further or take unconventional measures," Rahul Gupta of Emkay Global Financial Services in Mumbai, told Reuters.

He said the lockdown has affected the input costs and pricing power of manufacturers.

Last month's core inflation, excluding food and fuel, was estimated in the range of 4.07-4.08 per cent by two analysts, compared with 3.8-4.09 per cent the previous month. The statistics ministry does not release core inflation data.

The RBI last week said that the outlook for India's economic recovery has been sharply altered by the coronavirus outbreak, and revised its CPI inflation estimate to 4.8 per cent in the June quarter and 4.4 per cent in the September quarter.

RBI's Monetary Policy Committee (MPC) cut interest rates by 75 basis points in an emergency meeting last month and has taken steps to shore up liquidity, in line with most major central banks around the world.

Inflation could decline again this month, economists said, as record grains and horticulture production combine with weaker global oil prices to bring down retail prices already hit by falling domestic demand.