Retail inflation eases below 4% in February

Retail inflation eased below 4% in February on declining vegetable prices, sticking to the Reserve Bank of India’s (RBI’s) target range and raising hopes of a further reduction in interest rates.

The Consumer Price Index (CPI) rose 3.61% from a year ago, data released by the statistics ministry showed on Wednesday, when compared with a revised inflation reading of 4.3% in January.

Food inflation fell to 3.75% from a revised 5.97% in January, with vegetable prices declining 1.07% year-on-year when compared with an 11.35% jump in January.

Declining prices offers the regulator wriggle room to cut borrowing rates amid a slump in economic growth.

Last month, RBI lowered its policy rate for the first time in about almost half a decade.

Analysts in a Bloomberg survey expect RBI to cut rates by another 50 basis points this calendar year to shore up demand. One basis point is one-hundredth of a percentage point.

A weakening rupee, however, amid geopolitical tensions and global trade wars will pile up pressure on RBI as prices are expected to climb.

The Indian currency is among the worst-performing currencies across emerging markets this year, Bloomberg data showed.

Meanwhile, the Index of Industrial Production (IIP) grew 5% in January, when compared with a revised reading of 3.5% in December, data released separately showed.

Manufacturing output, which constitutes a major portion of the IIP, rose 5.5% in January when compared with 3.4% in December.

Mining also rose, growing 4.4% against 2.7% in December, though the electricity sector saw a slowdown, growing only at 2.4% against 6.2% growth in December.