Retail inflation, calculated on the basis on Consumer Price Index (CPI), eased to 5.91 per cent in March, driven by the decline in food inflation. The inflation in food basket slipped to 8.76 per cent in March 2020, compared to 10.81 per cent in the previous month, as per the CPI data released by the National Statistical Office (NSO) on Monday.
The retail inflation stood at 6.58 per cent in February 2020 and 2.86 per cent in March 2019, according to the CPI data.
"Keeping in view the preventive measures taken by NSO and announcement of nation-wide lockdown by the Government to check spread of COVID-19 pandemic, the field work for price collection of Consumer Price Index (CPI) was suspended with effect from 19th March, 2020 and about 66 per cent of price quotations were received," the release said.
As per the data, vegetables inflation eased to 18.63 per cent in March against 31.61 per cent recorded in February this year.
While prices of cereals and products climbed marginally to 5.30 per cent versus 5.23 per cent in February, pulses and products inflation stood at 15.85 per cent against 16.61 per cent in preceding month.
However, the inflation in the 'fuel and light' segment rose to 6.59 per cent in March over 6.36 per cent in February.
Data released by the NSO showed that retail inflation was in the RBI's upper target limit of 6 per cent for the first time since November 2019.
"The inflation rate slipping to 5.91 per cent, within the target range set by the central bank, gives more space for the RBI to adopt easy monetary policy. Food inflation eased to 8.76 per cent, mainly driven by the fall in vegetable prices. However, amid the lockdown and supply disruptions, there is need to closely watch how food inflation rate turns out in the coming days," said Deepthi Mary Mathew, Economist at Geojit Financial Services.
The Reserve Bank of India mainly factors in the retail inflation while deciding its monetary policy. The government has mandated the RBI to keep inflation at around 4 per cent.
In the seventh bi-monthly policy meeting in March, the central bank announced a massive 75 basis points (bps) cut in repo rate coupled with 100 bps reduction in cash reserve ratio (CRR) to mitigate the impact of coronavirus pandemic on the economy. The reverse repo rate was slashed even bigger by 90 bps to reduce financial stress on banks and encourage them to lend more money to businesses. The cash reserve ratio (CRR) of all banks was also reduced by 100 bps to 3 per cent of net demand and time liabilities (NDTL) with effect from fortnight beginning March 28, 2020 for a period of one year.