India Inflation February 2024

India: Inflation remains stable in February

Inflation held steady at January’s 5.1% in February. While February’s result represented the weakest inflation rate since October 2023, it was slightly above market expectations and the Central Bank’s 4.0% target. The figure was largely driven by rising prices for food and beverages. February’s reading means food inflation has exceeded general inflation for eight straight months—largely as a result of the El Niño weather pattern affecting agricultural yields. Meanwhile, core inflation eased to 3.3% in February from 3.5% in January.

The trend pointed down mildly, with annual average inflation coming in at 5.4% in February (January: 5.5%).

Finally, consumer prices increased 0.16% in February over the previous month, contrasting January’s 0.11% drop.

Our panelists expect inflation to trend downward ahead, largely on the Central Bank’s past hikes to interest rates and a fall in global commodity prices. While inflation is expected to remain above the Central Bank’s 4.0% central target even by the end of 2025, it should be comfortably within the Central Bank’s 2.0–6.0% target range. Strong rises in food prices are expected to continue pushing up price pressures ahead. In addition, domestic demand continues to fire on all cylinders, pushing up services inflation.

Analysts at Nomura said:

“We expect headline inflation to average at ~4.8% y-o-y in Q2 2024 and moderate to ~4.4% in H2, with an average of 4.7% in 2024 (FY24: 5.4%; FY25: 4.4%). We continue to expect headline inflation to converge with core inflation after June.”

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