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Retail inflation slipped to 5.9 per cent in March as against 6.58 per cent in February. This data has been derived on the basis of less than normal price quotes in the month of March.
With rate of inflation back in the targeted rate range of 2 to 6 per cent, the expectation is that the Monetary Policy Committee will further slash the policy rate. Last month this rate was lowered by 75 basis points (100 basis points mean 1 percentage point).
Considering the impact of Covid-19 on the economy and need for cheap liquidity, experts feel that next meeting will see rate cut by at least 50 basis points.
Retail inflation is measured by All India Inflation Rates based on Consumer Price Index (CPI) and Consumer Food Price Index (CFPI). Normally this index is prepared by price data which are collected from select 1,114 urban markets and select 1,181 villages by the Field Operations Division of National Statistical Organisation (NSO) in a uniform weekly roster.
However, due to the current lockdown, field activities were suspended with from March 19. Keeping this in mind, the internationally approved mechanism was applied on the received 66 per cent price quotations and accordingly indices were prepared.
The data shows inflation rate for vegetables slipped to 18.63 per cent in March from 31.61 per cent in February.
Also, the inflation rate for pulses came down to 15.85 per cent in March from 16.61 per cent in February. However, experts feel that trend will revert to high rates in the coming month as prices during the lockdown are seeing rising trend especially for pulses.
Commenting on the latest inflation number, Deepthi Mary Mathew, Economist at Geojit Financial Services, said the inflation rate slipping to 5.91 per cent, within the target range set by the central bank, gives more space for RBI to adopt easy monetary policy.
“Food inflation eased to 8.76 per cent, mainly driven by the fall in vegetable prices. However, amid the lockdown and supply disruptions, there is need to closely watch how food inflation rate turns out in the coming days,” she said.
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