India food prices drive retail inflation to 6.95% in March, a 17-month high

Retail inflation quickened to 6.95% in March, compared to 6.07% in the previous month, driven by a sharp jump in food prices, official data released on Tuesday showed.

A range of products have become expensive, driven by rising oil prices and broken supply chains due to the Ukraine war, the data showed.

Shop-end prices, as measured by the Consumer Price Index, breached the Reserve Bank of India's so-called tolerable limit of 6% for the third straight month, as food prices jumped 7.68% in March, against a rise of 5.85% in February.

Overall, retail inflation now stands at a 17-month high. The higher prices have begun to bite into demand. Households are buying less daily-use goods and items, according to market intelligence firm Bizom.

The government collects retail price data from selected 1,114 urban markets and 1,181 villages covering all states to gauge inflation, which has a direct impact on people's income and also economic growth.

A rise in food prices relatively hurts poor households more because low-income people spend a large share of their monthly budget on food.

Oils and fats inflation stood at 18.79% in March, compared to 16.4% in February, while vegetable prices rose 11.64%, compared to a rise of 6.13% in the previous month. Pulses price rose 2.57%, a marginal decline compared to 3.02% in February.

The CPI index on clothing and footwear rose 9.40% compared to an 8.86% increase a month ago. In the fuel and light inflation category, prices rose 7.52%.

On Friday, the Reserve Bank of India announced its new monetary policy, gearing towards inflation control. The central bank revised the country's inflation forecast to 5.7% in FY23 from 4.5% earlier, acknowledging pressures of inflation from crude oil crossing $100/barrel. High inflation not just erodes the value of money and savings, it can ultimately hurt growth itself.