Kerala records highest inflation in the country again as national rate hits 7-month low

Kerala has again recorded the highest retail inflation in the country for the second consecutive month, according to the latest data from the Centre. While the rate of inflation at the national level has been on a steady decline for the past seven months, Kerala has seen a sharp surge, with its inflation rate nearly double the national average. In February, the state’s inflation soared to a level well above the Reserve Bank of India's (RBI) target of 6 per cent.

According to the latest report from the Union Ministry of Statistics, India's retail inflation, measured by the All India Consumer Price Index (CPI), fell to 3.61 per cent in February, down from 4.26 per cent in January. This also marks the lowest decline since July 2023 (3.60 per cent). Rural inflation dropped from 4.59 per cent in January to 3.79 per cent in February, while urban inflation declined from 3.87 per cent to 3.32 per cent. Food inflation, a key driver of overall inflation, also saw a sharp decrease, falling from 5.97 per cent in January to 3.75 per cent, which marked the lowest decline since May 2023.

Several commodities saw substantial price hikes last month, with coconut oil leading the surge at 54.58 per cent, followed by coconut (41.61 per cent), gold (35.56 per cent), silver (30.89 per cent), and onion (30.42 per cent). Conversely, some items witnessed significant price drops, including ginger (-35.81 per cent), cumin (-28.77 per cent), tomato (-28.51 per cent), cauliflower (-21.19 per cent), and garlic (-20.32 per cent).

Kerala tops inflation charts for the second consecutive month

Kerala’s inflation rate surged to 7.31 per cent in February, up from 6.76 per cent in January, once again making it the highest in the country. This figure is well above the RBI’s target range of 2 to 6 per cent. Chhattisgarh followed at 4.89 per cent, with Karnataka (4.49 per cent), Bihar (4.47 per cent), and Jammu & Kashmir (4.28 per cent) rounding out the top five. In contrast, Telangana recorded the lowest inflation rate at 1.31 per cent, edging past Delhi (1.54 per cent). Other states with relatively low inflation included Andhra Pradesh (2.44 per cent), Jharkhand (2.68 per cent), and Gujarat (2.98 per cent).

Rural inflation drives Kerala’s woes

Kerala’s inflation surge is largely fueled by rising rural prices. Rural inflation soared to 8.01 per cent in February- up from 7.31 per cent in January and 6.92 per cent in December. This marks the highest rural inflation rate in the country, in stark contrast to Telangana’s mere 0.49 per cent. Meanwhile, urban inflation also climbed, reaching 5.94 per cent in February, up from 5.81 per cent in January and 5.29 per cent in December.

RBI may cut interest rates further

The Reserve Bank of India (RBI) closely monitors retail inflation to adjust its benchmark interest rates (repo rate). With national inflation dropping to 3.61 per cent in February, which is below the RBI’s 4 per cent target, speculation is mounting that another rate cut could be on the horizon. In its February monetary policy meeting, the RBI already reduced the repo rate by 0.25 per cent, and another cut may be considered in the upcoming meeting.