The Reserve Bank of India, in its monthly bulletin on Tuesday, noted that consumer price inflation (or retail inflation) in India remained high while core inflation defied to reflect the softening of various input costs.

“Consumer price inflation remains high and core inflation continues to defy the distinct softening of input costs,” RBI said in the ‘State of the Economy’ section of the report. Core inflation is the change in the costs of goods and services, barring those from the food and energy basket.

Retail inflation in India fell marginally but remained above RBI’s 6 per cent upper tolerance band for the second straight month in February 2023, with the Consumer Price Index pegged at 6.44 per cent. In January, the retail inflation was 6.52 per cent.

India’s retail inflation was above RBI’s 6 per cent target for three consecutive quarters and had managed to fall back to the RBI’s comfort zone only in November 2022.

Under the flexible inflation targeting framework, the RBI is deemed to have failed in managing price rises if the CPI-based inflation is outside the 2-6 per cent range for three quarters in a row.

Since May last year, the RBI has increased the short-term lending rate by 250 basis points, including the latest 25 bps hike, to tame inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.

Notably, consumer inflation in the US moderated in February to 6.0 per cent from 6.4 per cent the previous month, but the numbers are still way above the 2 per cent target.

The RBI, in its monthly bulletin, pointed out that a silver lining, stating that India has emerged from the pandemic years stronger than initially thought.

“Even as global growth is set to slow down or even enter a recession in 2023 as global financial markets wager, India has emerged from the pandemic years stronger than initially thought, with a steady gathering of momentum since the second quarter of the current financial year,” the report stated.

On the supply side too, the RBI bulletin said India’s agriculture sector is into a seasonal uptick, whereas industry is emerging out of earlier contraction and services have maintained momentum as well.