NEW DELHI: India’s retail inflation edged down to 6.44% in February from a three-month high of 6.52% in January. Consumer prices remained above the Reserve Bank of India’s tolerable limit of 6% for two consecutive months, official data released by the government on Monday showed.
The food and beverage inflation index, which was raised on the back of extreme weather conditions and global headwinds, came in at 6.26% for the month, up from 6.19% in January, indicating continued price pressures on staples, particularly grains.
Global inflation has hit its highest level in decades, with Russia’s invasion of Ukraine, the impact of China’s lockdown and supply disruptions pushing up prices on everything from energy to food and putting pressure on households, including in India .
Also read: Four charts capturing the inflation situation in India
In December, India’s consumer inflation slowed to a yearly low of 5.72% before rebounding.
This is how retail prices have developed in some common household categories:
Grain prices rose 16.73% in February versus a 16.12% increase in January. Egg price growth slowed to 4.32% from 8.78% in the previous month. Inflation for milk and dairy products was 9.65% compared to 8.79% in January. Clothing and footwear inflation was 8.79% compared to 9.08% a month ago. Fuel and light air inflation was 9.9% in January compared to 10.84% in January
Higher inflation could prompt the RBI to raise lending rates further, analysts said. The Reserve Bank of India (RBI) raised benchmark interest rates by a much-expected quarter-point to 6.50% in February and continued to focus monetary policy on taming stubborn core inflation, a move that sidesteps volatile items like food and fuel costs.
Central banks typically raise the repo rate — the rate at which commercial banks borrow money by selling their securities to the Reserve Bank — to reduce the money supply in the economy.
Lower interest rates make borrowing easier, and businesses typically borrow to invest in new economic activities. Therefore, more cash increases inflation because more money chases fewer goods as the money supply can be increased overnight but not purchasable goods which take a lot of time to produce.
As the interest rate at which banks borrow money increases, personal loans such as personal loans, car loans, and home loans become more expensive.
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