CPI inflation eases to four-month low of 4.44% in February 2018

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The rate of increase in price rise slowed for the second consecutive month after hitting a fresh high of 5.2 percent growth in December and 5.07 percent in January due to unusual pick-up in food prices and rise in domestic petrol and diesel prices.

Moreover, this was the biggest growth since February 2011.

The industrial output had increased 7.1% in December 2017 compared to the output in December 2016.

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As per use-based classification, the growth rates in January 2018 over January 2017 are 5.8 percent in primary goods, 14.6 percent in capital goods, 4.9 percent in intermediate goods and 6.8 percent in infrastructure/construction goods.

Interms of industries, sixteen out of the twenty-three industry groups in the manufacturing sector have shown positive growth during the month of January 2018 as compared to the corresponding month of the previous year.

But, on a cumulative basis, the IIP expanded by 4.1 per cent between April and January 2017-18, which was lower than the 5 per cent growth in the same period a year ago. Within the food items, the inflation fell for vegetables to 17.57%, fruits 4.80%, meat and fish 3.31%, sugar and confectionery (-) 0.26% and cereals and products 2.10%.

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Considering the above mentioned factors, RBI now estimate inflation to be at 5.1% in Q4, including the HRA impact.

The CPI inflation was in line with the Reserve Bank of India forecast of 5.1% from January to March.

Retail food inflation was at 3.26% compared to 4.7% in December 2017. "Domestic pump prices of petrol and diesel rose sharply in January, reflecting lagged pass-through of the past increases in global crude oil prices".

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"The sharp dip in retail inflation in February has reinforced our expectation that the MPC would keep the repo rate unchanged in the upcoming policy review in April, which may prompt a further easing of bond yields in the immediate term", said Aditi Nayar, Principal Economist, ICRA, warning that inflation may see a spurt in the coming months.

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