India's benchmark inflation rate, measured by the Consumer Price Index (CPI) rose to 6.07 per cent year-on-year in February 2022, data released by the Ministry of Statistics and Programme Implementation on Monday showed.
The CPI-based retail inflation was 5.03 per cent in February 2021 and it increased to a 7-month high of 6.01 per cent in January of 2022 from an upwardly revised 5.66 per cent in December.
According to the data released by the National Statistical Office (NSO), the rate of price rise in the food basket was 5.89 per cent in February, up from 5.43 per in the preceding month.
The Reserve Bank of India mainly factors in the CPI-based inflation while arriving at its bi-monthly monetary policy.
In its recently concluded monetary policy meeting, the Reserve Bank of India said inflation based on the consumer price index (CPI) is expected to come well below its upper tolerance level, at 4.5 per cent, in the next fiscal year beginning April 2022.
However, the central bank retained its inflation projection at 5.3 per cent for the current financial year.
Dr. M Govinda Rao, Chief Economic Adviser at Brickwork Ratings, said: For Q4FY22, we expect the inflation level to exceed 6% as against RBI’s projections of 5.7%. The price levels are likely to remain sticky in the next few months, despite the fading base effect, due to continued supply disruptions caused by the ongoing geopolitical developments and continued price increase in crude oil, edible oil, and metals’ prices.
In addition, the supply disruption in semiconductors is also likely to create adverse effects on both output and prices in the electronics and automobile industries.
"The RBI is now faced with Hobson’s choice of pushing growth or controlling inflation. Although the escalation in prices is mainly due to the supply disruptions it will not be long before it can spill over to the demand side and force the RBI to give up the accommodative stance. We expect the RBI to revise the inflation forecast upwards for the next fiscal from its current estimate of 4.5% and start focusing on inflation from the next meeting of the monetary policy committee," he said.