India CPI inflation in February drops to 6.44%, higher than Street estimates

Food price inflation came in at 5.9 percent, compared to 6 percent in January. The January inflation was largely cereals-driven. However, there has been a crash of onion and potato prices. Despite this, food prices remained close to the 6 percent, indicating that cereals were still pretty expensive — thereby explaining the CPI inflation coming in at 6.44 percent, above Street expectations. Cereal prices were up 16.73 percent and milk prices came in at 9.65 percent.

Meanwhile, rural inflation stood at 6.72 percent, whereas urban inflation came in at 6.10 percent. While the rural inflation for January had come in at 6.85 percent, urban inflation was at 6 percent.

The February core inflation remained unchanged at 61. percent, the same as the last two months. The CNBC-TV18 poll had predicted the February core inflation to come in at 6.05 percent.

Rupa Rege Nitsure of L&T Finance Holdings said the inflation could be higher than expected as free foodgrain was removed from CPI. "If that is the reason, then I feel this ugly print is mainly because of administrative reasons. Because the disinflation in vegetable prices is very high. And other components also are not showing that higher increase. Without people's consumption going up, if they increased the weights to take care of previous weights, then the inflation number is higher mainly because of this PDS-food grain inflation adjustment, which is very unfortunate," she said, adding that the RBI, MPC should look at inflation without this adjustment.

On being asked if the RBI's MPC is likely to hike interest rates further, Aditi Nayar of ICRA, said that with two CPI prints being above 6 percent, so far, she doesn't think there is any other option but to go in for another rate hike. "Unless, the MPC is able to ascertain that this is a specific impact related to the statistical adjustment and therefore it can be looked into," she said.

While the CPI in January stood at 6.52 percent, the same for December 2022 was at 5.72 percent. In November, it was 5.88 percent and 5.59 percent in October 2022.