Food inflation still pinched in February despite hitting a 21-month low

Sequentially, prices of most food items rose in February

Despite food inflation falling to a 21-month low of 3.8 percent, inflation would still pinch the common man as prices of more than half of the food items in the CPI basket rose in February over previous month, according to a Moneycontrol analysis.

Food items constitute 44 percent of the total retail inflation basket and are instrumental in determining the direction of India’s consumer price index.

On a sequential basis, items that make up 55 percent of India’s food basket witnessed a rise in February, constituting nearly a quarter of the share of India’s overall inflation.

CPI inflation had declined to a seven-month low of 3.6 percent in February as food inflation fell from 6 percent in January to below 4 percent.

What’s Driving Food Inflation?

The decline in food inflation was led by vegetables and pulses. Inflation in vegetable prices has been in double-digits for 14 of the last 15 months, and deflated in February after prices came in a percent lower compared to previous year. Pulses inflation too was in the negative territory for the first time in nearly three years.

There was no respite on fruit prices, with fruit inflation rising to a 10-year high of 14.8 percent in February. Headline inflation has now remained in the double-digits for two consecutive months.

Sequentially, banana prices were up nearly 3 percent in February, while coconut prices were 2.8 percent high. Papaya too was costlier by 3 percent, whereas Guava prices was 8 percent higher.

Prices of rice were 0.4 percent higher, while oil inflation rose to a near three-year high of 16.4 percent compared with 15.6 percent a month ago.

Sequentially, refined oil was 0.5 percent more expensive in February, while coconut oil sold at a 3.7 percent premium.

Economists contend that food inflation may have bottomed out for now, with vegetables also experiencing a rise in prices.

“We believe that the sequential uptick in vegetable inflation in March 2025 is likely to prevent a further softening in the food and beverages inflation print in the month, after the substantial cooling seen over the past four months. This would push up the CPI inflation print mildly to ~3.9-4.0 percent in the next month,” said Aditi Nayar, chief economist, Icra.

Services and Core Goods On the Rise

Households spending more on services and goods other than food also felt the pinch of rising prices.

Services inflation rose to a 17-month high of 3.71 percent in February from 3.59 percent in the previous month, while other goods inflation rose to 4.44 percent from 3.9 percent a month go.