India’s retail inflation, measured by the Consumer Price Index (CPI), dropped to 3.61% in February, the lowest in seven months. This is the first time ithat inflation has fallen below the RBI’s 4% target.
Context: CPI measures how much prices of everyday goods and services like food, rent, and healthcare change over time.
It helps track inflation, showing whether things are getting more expensive or cheaper. If CPI goes up, it means the cost of living is rising; if it goes down, prices are stabilizing or falling.
The RBI primarily considers CPI data when formulating its bi-monthly monetary policy.
The deets: the drop in inflation was largely driven by a decline in vegetable prices with the index seeing a sharp drop of -1.07% from 11.35%.
Food index fell to 3.75% from 6.02%
- Rural inflation eased to 3.79% from 4.64% in January
- Urban inflation moderated to 3.32% from 3.87% (MoM)
- Pulses inflation turned negative at -0.35% compared to 2.59% in January
- Fuel and light inflation remained in deflationary territory at -1.33% against -1.38% in the prior month.
Zoom out: inflation data comes after GDP growth in India just missed expectations but increased from the previous quarter in Q4, at 6.2%.
Inflation cooling below RBI’s 4% target signals economic stability and easing price pressures. Lower inflation means consumers have more purchasing power, boosting demand and overall economic activity.
It also strengthens the case for potential rate cuts, which could support borrowing, investments, and business expansion. However, sustained growth will depend on how well supply chains, global factors, and policy decisions align in the coming months.
Worth mentioning: India’s Index of Industrial Production (IIP) expanded by 5% in January, outperforming market expectations.
Industrial production measures the total output of factories, mines, and utilities in an economy. It tracks how much goods are being produced, giving insight into the health of the manufacturing and industrial sectors.
