India's wholesale inflation reaches 8-month high of 2.38% in February
What's the story
India's wholesale inflation rose to 2.38% in February, an eight-month high. The increase is a marginal rise from the previous month's 2.31%, according to government data. The spike in inflation is mainly due to higher prices in sectors like food products, manufacturing, non-food items, and textiles production. Notably, this rate surpassed economists' estimate of 2.36% according to a Reuters poll.
Inflation trends
February sees a slowdown in wholesale food inflation
In February, wholesale food inflation fell to 5.94%, down from 7.47% in January. The inflation of primary articles also fell from 4.69% in January to 2.81% in February. However, fuel and power prices contracted slightly by 0.71%. Nevertheless, manufactured products prices increased by 2.86%, up from the previous month's 2.51% increase.
Retail scenario
Retail inflation falls to 7-month low in February
Unlike wholesale inflation trends, India's retail inflation dropped to a seven-month low of 3.61% in February, down from January's 4.31%. The decline was primarily due to lower food prices as food inflation fell sharply to 3.75% in February from January's 5.97%. The Reserve Bank of India (RBI)'s Monetary Policy Committee (MPC) observed that this decline was due to a favorable outlook on food prices and expects further moderation in FY 2025-26.
Future outlook
RBI's inflation projections and economic challenges
The RBI has projected an overall inflation rate of 4.2% for FY26, with quarterly rates expected to gradually decrease over the year. However, the Economic Survey for 2024-25 has warned about potential risks to India's economic stability due to factors such as a weakening Rupee, volatile inflation rates, and decreasing foreign investment. Despite these challenges, the fall in consumer inflation has increased expectations of another rate cut by the RBI in its upcoming April meeting.