Retail inflation rose to a three-month high of 5.03 per cent in February, mainly because of the rising trend witnessed in food prices, Ministry of Statistics & Programme Implementation (MoSPI) data showed on Friday.

The rate of price rise in the food basket accelerated to 3.87 per cent in February, as against 1.89 per cent in the preceding month, as per data released by the National Statistical Office (NSO).

The Consumer Price Index (CPI) based retail inflation stood at 4.06 per cent in January. The previous high was witnessed at 6.93 per cent in November 2020.

For fruits, the retail inflation grew to 6.28 per cent from 4.96 per cent, while in case of vegetables, the rate of deflation was softer at (-)6.27 per cent against (-)15.84 per cent in the preceding month. For others, milk and products, pulses and products, and eggs had inflation prints at 2.59 per cent, 12.54 per cent and 11.13 per cent respectively. The corresponding rates were 2.73 per cent, 13.39 per cent and 12.85 per cent in January.

Earlier, the Reserve Bank of India had projected retail inflation at 5.2 per cent for the fourth quarter of the ongoing fiscal year. The statement was made while RBI Governor, Shaktikanta Das, was presenting his monetary policy for the last month.

Separately, index industrial production lost momentum again in January 2021 and contracted 1.6 per cent, dragged down by poor manufacturing activity and muted consumer demand. According to Emkay, this is a temporary blip as activity indicators show improvement in Q4FY21.

According to an analysis report by Emkay Global Financial Services while the overall demand condition still remains patchy, the continued traction in activity, possibly improving producers’ pricing power and rising input costs weigh on the underlying inflation that could see further firming up in March.

But on the brighter side, the report said that the “headline inflation may average 4.5 per cent in FY22E vs. 6.2 per cent ki in FY21E, on the assumption that the food inflation normalizes. We see core inflation outdoing headline inflation through most part of FY22, averaging 5.2 per cent, same as FY21. We, however, remain watchful of risks in the form of cost push pressure in non-food and non-perishable goods, seasonal upside in food prices in summers and demand-led better pricing power,” the report said.