India's inflation holds steady in February at 5.09 pc, core inflation declines

India's Consumer Price Index (CPI) remained unchanged in February, registering a 5.09 per cent inflation rate, mirroring the previous month's figure of 5.1 per cent.

Analysts had anticipated this stability, with a Bloomberg poll projecting a CPI of 5.05 per cent for February.

While the headline inflation remains above the Reserve Bank of India's (RBI) target of 4 per cent, core inflation, which excludes food and fuel components, has declined to 3.37 per cent.

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This marks the lowest core inflation level since November 2019, indicating a lack of overheating in the Indian economy.

Despite the overall stability, food inflation experienced a slight uptick from 8.3 per cent in January to 8.6 per cent in February.

Notably, prices of eggs, fish, and meat witnessed a sharp increase, contributing to this rise in food inflation.

Additionally, vegetable inflation rose from 27.1 per cent in January to 30.3 per cent in February, reflecting ongoing supply-side challenges.

However, the future trajectory of inflation, particularly for cereals and pulses, hinges on the winter crop harvest.

Reports suggest that recent rains in parts of north and northwest India, driven by western disturbances, may have resulted in crop damage, influencing future price dynamics.

In other economic indicators, the Index of Industrial Production (IIP) for January fell slightly below analyst expectations, growing at 3.8 per cent. This marks a growth from the 5.8 per cent recorded in January 2023, according to data released by the National Statistics Office (NSO).

Manufacturing, the dominant component of the IIP basket, expanded at a slower rate of 3.2 per cent compared to December 2023. This comes at a slightly lower than the 4.5 per cent growth seen in the same month of the previous year.

Despite this, caution is warranted in interpreting this as a significant decline in economic momentum, as other indicators like the Purchasing Managers’ Index (PMI) suggest continued expansion.

(With inputs from PTI)