BUSINESS
Inflation in major food items showed a contraction in February
Your food bill could continue to remain low with prices for vegetables, sugar, pulses and fruits staying deflationary.
Only the prices of eggs remained inflationary. Besides food items, prices of liquefied petroleum gas (LPG) declined sharply, pulled down by the lagged impact of the softening of international energy prices, according to RBI data. The prices of firewood, with the second-largest weight in the fuel group, also declined, according to RBI data.
Deflation in many subgroups of the CPI index helped RBI project lower retail inflation in the coming months. Inflation in major food items showed a contraction in February. Fruit inflation contracted 4.62%, vegetables contracted 7.69% and pulses and products 3.82%. Inflation in the new fiscal is also expected to stay below the RBI's medium target of 4%.
"With CPI outlook benign, RBI will now address growth challenges," said RBI governor Shaktikanta Das.
The RBI household inflation expectation survey also shows that households believe that prices will fall further from a year back. But the only worry the onset of monsoon and its distribution throughout the country.
Retail inflation, according to RBI's projections, will be 2.9% to 3% in the first half of 2019-20 and 3.5% to 3.8% in the second half of 2019-20. Retail inflation was 2.6% in February after four months of continuous decline. RBI said the uptick in inflation was driven by an increase in prices of items excluding food and fuel and weaker momentum of deflation in the food group. Within the food group, deflation in four sub-groups – vegetables, sugar, pulses and fruits – continued in February.
Even the inflation on clothing, footwear, transport and communication remained low. However, inflationary trends continued in education and health sub-groups, though moderating over the December levels. Inflation expectations, measured by the Reserve Bank's survey of households, declined in the February round over the previous round by 40 basis points each for the three months ahead and for the one-year ahead periods.
Abheek Barua, chief economist, HDFC Bank said the central bank's inflation expectations are in line with the bank's internal assessment.
Firms participating in the Reserve Bank's industrial outlook survey of manufacturing companies reported reduction in input price pressures, but they expected an increase in staff expenses in the first quarter of 2019-20. Farm and industrial input costs increased at a slow pace in January-February 2019. Nominal growth in rural wages and staff costs in the organised manufacturing and services sectors remained muted in the third quarter of the last fiscal.
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