Inflation in March likely to ease but milk and sugar to stay on the boil

India’s retail inflation or the consumer price index (CPI) for March is likely to ease compared to the previous month as well on a year-on-year basis owing to a high base. March retail inflation data and February’s index of industrial production (IIP) will be announced on April 12 evening.

A CNBC-TV18 poll of analysts pegs the March CPI inflation figure at 5.63 percent as against the February shocker of 6.44 percent. CPI data is key to watch out for as it drives the Reserve Bank of India’s (RBI) interest rate policy.

It must be noted that a year ago, March was the month of the Ukraine war. Therefore, inflation then shot up from about 5 percent in February to 6.95 percent in March 2022, and even higher to 7.79 percent in April. So, the high base of edible oils and cereals prices will make the CPI index for March of 2023 look benign.

Meanwhile, the retail inflation in February 2023 was a shocker, largely because of food prices. The National Statistical Office (NSO) also did some recalculation and rearranged weights for the month, but most importantly, milk was a shocker.

For the current month under review, March as well, milk inflation is likely to still inch up higher as many dairy companies have hiked prices for March and for April.

Sugar prices have been rising too which analysts suggest could be a bit of a bother too. Pulses are likely to remain steady but the positives are expected to come from cereals.

In the core category, which is largely services, gold is calculated under personal services. Gold prices went up due to global developments and that may keep the core inflation as high as it was in the previous month. But if it is 5.63, the RBI will be vindicated and if it is anything closer to 6, RBI’ pause on revising key lending rates will be questioned.