India's Feb retail inflation up 6.07% year-on-year, above RBI target for 2nd month

New Delhi: India's annual retail inflation in February for a second consecutive month exceeded 6 per cent, above the central bank's tolerance limit, while economists said policy rates were unlikely to rise soon given worries over economic recovery.

Consumer prices rose 6.07 per cent in February, boosted by rising costs of food, fuel and household items, compared with 6.01 per cent in the previous month, Ministry of Statistics data showed on Monday.

Analysts in a Reuters poll had predicted annual inflation would touch 5.93 per cent, just below the upper limit of the Reserve Bank of India's 2 per cent to 6 per cent target.

Prime Minister Narendra Modi's government is worried that rising energy and other commodity prices after the Russian invasion of Ukraine last month, coupled with rupee depreciation could stoke inflationary pressures and hit recovery.

Food prices, which contribute to nearly half of the consumer price index (CPI), climbed 5.85 per cent year-on-year in February, compared with 5.43 per cent a month before.

Economists said that in contrast to the U.S. Fed and some other central banks, the Reserve Bank of India (RBI) was not expected to raise rates soon despite high inflation given the pressure to support economic recovery.

Sakshi Gupta, an economist at HDFC Bank said the central bank could continue to look beyond high inflation prints — viewing them as a supply-side problem — in the near term and lean towards supporting growth.

"We do not expect the RBI to change its stance or policy rate at its April meeting.

RBI's monetary policy committee (MPC) will meet from April 6-8 for its next policy review. 

Economists estimated that the core inflation, excluding volatile fuel and food prices, marginally eased to 5.9 per cent to 5.95 per cent in February from 6 per cent to 6.02 per cent in the previous month. 

Warning against inflationary pressures, Michael Patra, RBI's deputy governor said last week that India's growth story remained as weak as it was during the 2013 'taper tantrum' and geopolitical tensions in Ukraine and Russia were further likely to hurt a recovery.

The RBI's monetary policy committee (MPC) had left the benchmark repo rate unchanged at 4.0 per cent last month, sticking to its accommodative policy stance to help the economy recover from the pandemic.