It said that inflation readings for Jan and Feb show that the easing of vegetable prices in the winter was short-lived. Meanwhile, meat and fish have registered a surge, and cereal prices have maintained their strong momentum.
“Fuel prices remain in deflation, and this may get pronounced in March due to reduction in the price of LPG. Overall, headline inflation’s momentum turned positive in Feb 2024, offsetting a favourable base effect. Accordingly, monetary policy has to remain in a risk-minimisation mode, guiding inflation towards the target while sustaining the momentum of growth,” the report said.
According to the report, inflation is likely to be impacted by changes in per capita consumption patterns. “The share of food items in the monthly per capita consumption expenditure (MPCE) has declined from 52.9% to 47.5% in rural areas and from 42.6% to 39.7% in urban areas between 2011-12 and 2022-23, with cereals recording the most significant decline. Within food, however, there has been a rise in the share of high value food products such as fruits, milk and prepared meals.
“Since the shares of consumption form the weights for calculating CPI (the current CPI derives its weight from the 2011-12 HCES), these changes could impact the measurement of retail inflation,” the report said.
“The global economy is losing steam, with growth slowing in some of the most resilient economies and high-frequency indicators pointing to further levelling in the period ahead. In India, real GDP growth was at a six-quarter high in Q3 2023-24, powered by strong momentum, robust indirect taxes, and lower subsidies,” the report said.
