Food Inflation Current Affairs - 2019

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Retail inflation increases to 2.57% in February 2019

The Central Statistical Office (CSO) has released the data of Inflation for the month of February 2019. The data shows that:

  • Retail inflation was at a four-month high of 2.57 per cent in February 2019 due to costlier food articles. The retail inflation was highest since October 2018 when it stood at 3.38 per cent.
  • Consumer Price Index-based inflation for January 2019 was revised down to a 19-month low of 1.97 per cent from an earlier estimate of 2.05 per cent.
  • Food inflation at (-) 0.66 per cent in February 2019 was lower against 3.26 per cent in the same month last year.
  • The consumer food price index increased by 0.15 per cent in February against January 2019.
  • The prices of Protein-rich items such as meat & fish and eggs witnessed a quick rise in prices at 5.92 per cent and 0.86 per cent respectively in February.
  • The prices of cereal and products went up at 1.32 per cent.
  • Fruits and Vegetable prices continued their declining trend.
  • In the fuel and light category, the rate of price rise slowed to 1.24 per cent from 2.20 per cent in January.

With the headline inflation reading at 2.57 per cent and industrial production growth on the downside at 1.7 per cent, economists see a case and space for one more rate cut of 25 bps by RBI in April to support growth.

RBI Sixth bi-monthly Monetary Policy Statement 2018-19: Key Facts

The important facts related to the RBI’s sixth bi-monthly monetary policy statement for 2018-19 is listed below:

  • RBI has relaxed the CPI or retail inflation forecasts for India in FY20.
  • Because of the low inflation forecasts, RBI has decided to trim down policy repo rate by 25 basis points, taking the overall interest rate down to 6.25% now from previous 6.50%.
  • The policy stance has also been changed from calibrated tightening to neutral.
  • RBI data suggests that the 7th Pay Commission’s HRA allowance impact on the inflation indicator has diminished.
  • The reverse repo rate under the liquidity adjustment facility now stands adjusted to 6.0 per cent.
  • The marginal standing facility (MSF) rate and the Bank Rate now stand at 6.5 per cent.

Why the Inflation Forecasts were on the lower side?

The lower inflation forecasts by the RBI are attributed to the following reasons:

  • Food inflation has continued to be on the downside with continuing deflation across several items and a significant moderation in inflation in cereals. Food commodities are experiencing excess supply conditions domestically as well as internationally. Hence, the short-term outlook for food inflation appears particularly benign, despite adverse base effects.
  • The moderation in the fuel prices was larger than anticipated. Inflation in items of rural consumption such as firewood and chips, which had remained sticky and at elevated levels, has collapsed in recent months. Electricity prices have also witnessed an unexpected moderation. This resulted in a softer outlook for the fuel group
  • The recent unusual pick-up in the prices of health and education is seen as a one-off phenomenon.

The next meeting of the MPC for the policy review is scheduled from April 2 to 4, 2019.