However, inflation is still above the Reserve Bank of India (RBI) comfort zone of 6% for the second straight month, data released by the government showed on Monday.
Inflation for the food basket was 5.95 percent in February, lower than 6 percent in January
Barring November and December 2022, retail inflation has remained above the RBI’s upper tolerance level of 6 percent since January 2022.
Retail inflation had accelerated to a three-month high in January on the back of rising prices for grains, eggs, meat, fish and milk, reversing the easing trend to pose a new challenge to policymakers.
The Reserve Bank has forecast retail inflation at 6.5 per cent for 2022-23, with the January-December quarter at 5.7 per cent.
The central bank has been mandated by the government to ensure retail inflation remains at 4 percent with a margin of 2 percent on both sides.
Case for interest rate increase
Economists said food inflation could remain high for the next few months, with El Nino conditions predicted in 2023, while sticky core inflation, excluding volatile food and energy prices, left little room to absorb higher food prices.
“We continue to expect the RBI to raise the repo rate by another 25 bps in April, while keeping its stance unchanged. But the central bank is also likely to keep a close eye on potential stress in the US banking system and be ready to become flexible and proactive if the need arises,” said Yuvika Singhal, Economist, Quanteco Research.
(With input from agencies)