India inflation touches 17 month high of 6.95%

India inflation at 6.95%

by 5paisa Research Team Last Updated: Dec 14, 2022 - 10:04 pm 31.1k Views

Inflation in India has been on an ascendant since the last 6 months and the latest CPI inflation for Mar-22 came in at a 17-month high of 6.95%. Between Sep-21 and Mar-22, retail inflation surged by 260 bps from 4.35% to 6.95%.

There could be more to come and here is why. Petrol and diesel price hikes have just started getting factored in Mar-22 and the downstream impact on transport and logistics inflation will be evident in Apr-22.

The highest weight in the CPI inflation basket in India is food inflation and there were two aspects to it. First was the spike in overall food inflation and the second was the distinct spike in rural food inflation. Food inflation for Mar-22 was up by 183 bps sequentially from 5.85% to 7.68%.

Over the last 5 months, food inflation has surged by an incredible 600 bps, despite hopes of robust Rabi arrivals. Food basket pinches due to its 45.86% weightage.

Check - Inflation for Feb-22 comes in higher than expected

However, the bigger story was the spike in rural inflation in Mar-22. Rural inflation was sequentially up from 6.38% in Feb-22 to 7.66%. That was largely driven by rural food spiking from 5.81% to 8.04% month-on-month.

Rural inflation spike was visible in a number of products. For instance rural inflation for meat & fish was 9.82%, oils & fats 20.75%, spices 8.96%, vegetables 10.57%, clothing 9.00%, footwear 12.18% and personal care at 9.34%.


Within the overall inflation basket, core inflation (excluding food and fuel) has a special significance. Core inflation stood at a new high of 6.5% in Mar-22. Why does core inflation matter? It is stickier and more structural, so it is harder to control.

Controlling core inflation is normally an economic trade-off between revenues and inflation control. That is the dilemma the government must deal with in the fiscal year FY23, which has just started.

That brings us to the most important question, what does CPI inflation at 6.95% mean for RBI stance and future rate policy? RBI avoided rate hikes in Apr-22 policy as it still wanted to keep the environment conducive to recovery of industrial growth.

That is, in a way, borne out by the IIP data, which has shown a reluctance to grow above the pre-COVID levels. However, the bigger challenge to the RBI may come from the external environment.

Here is why the road ahead will be a lot tougher. The US Fed hiked rates by 25 bps in March and plans another 50 bps hike in May 2022. In short, rates will be closer to 2.25% by end of 2022.

The longer RBI maintains its dovish stance, the more it risks monetary divergence. Going ahead, with US inflation at 8.50% and India inflation at 6.95%, controlling inflation has to be the theme of monetary policy. RBI will have to converge sooner than later.

Also Read:-

What do US Fed’s minutes indicate and what could RBI do now?

How do you rate this article?


Start Investing in 5 mins*

Rs. 20 Flat Per Order | 0% Brokerage

About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.

Open Free Demat Account

Resend OTP
Please Enter OTP
Account belongs to

By proceeding, you agree to the T&C.

Latest News
Sahana Systems IPO GMP (Grey Market Premium)

Sahana Systems IPO worth ₹32.74 crore comprises entirely of a fresh issue of shares by the company. The price band has been fixed in the range of ₹132 to ₹135.

  • Jun 07, 2023
Spectrum Talent Management IPO GMP (Grey Market Premium)

The ₹105.14 crore IPO of Spectrum Talent Management IPO comprises entirely of a combination of a fresh issue of shares and an offer for sale (OFS) by promoters and early shareholders.

  • Jun 07, 2023
IKIO Lighting IPO GMP (Grey Market Premium)

IKIO Lighting IPO worth ₹607 crore comprises of an offer for sale and also of a fresh issue of shares. The offer for sale (OFS) component is by the promoters and early shareholders of the company.

  • Jun 07, 2023

Start Investing Now!

Open Free Demat Account in 5 mins

Enter Valid Mobile Number