In February 2024, India’s Consumer Price Index (CPI) inflation remained flat at 5.09% YoY. Food inflation increased to 7.8% YoY in Feb’24 from 7.6% YoY in the previous month. Core inflation, however, eased to an all-time low of 3.35% YoY from 3.6% YoY during the same period. Food inflation remained broad-based, with 41% of items in the food basket witnessing inflation rates surpassing 6%, while only 6% of items in the core basket reached this threshold.

Vegetables remained the primary driver of inflation. Vegetable inflation increased to 30.2% YoY in Feb’24 from 27.1% in the previous month, as vegetables witnessed limited seasonal price correction in February. Pulses and spices inflation also remained elevated at 18.9% YoY and 13.5% YoY respectively. Weak rabi production in the current season poses upside risks to food inflation.

We expect inflation to average around 4.5% in FY25. The RBI MPC is expected to maintain a pause until there is visibility of inflation durably aligning with the 4% target. The IMD monsoon forecast for 2024 is the key event to watch for assessing the trajectory of food inflation.

Click here to read the full report