Page 4 - Policy Economic Report - February 2023

Policy and Economic Report:
Oil & Gas Market

Retail inflation in January 2023 stood at 6.52 %, exceeding the 6 % upper tolerance limit set by the Reserve
Bank of India. Inflation, recorded by the Consumer Price Index (CPI), rose by 0.8 % points in January,2023,
after hitting a one year low of 5.72 % in December 2022. The rise in inflation is attributed to sticky core
inflation and an unexpected rise in food prices. Core inflation, which excludes volatile groups such as food
and fuel and light, has been around the 6 to 7 % mark since the beginning of the pandemic. Food inflation
saw a sharp rise in inflation from 4.19 % in December 2022 to 5.94 % in January 2023. Inflation in the price
of cereals and products was at a five year high of 16.12 % in January 2023. Sharp rises in the prices of
cereals and products can broadly be attributed to the reduced supply of wheat and rice in the current
fiscal year.

The Monetary Policy Committee has decided to increase the policy repo rate under the liquidity
adjustment facility (LAF) by 25 basis points to 6.50 %. The rate has been hiked by 250 bps since May 2022.
Consequently, the standing deposit facility (SDF) rate stands adjusted to 6.25 % and the marginal standing
facility (MSF) rate and the Bank Rate to 6.75 %.

The CMIE data for February, 2023 suggest that the unemployment rate has been at 7.55% in the month
of February, 2023 with urban unemployment rate at 8.08 % and the rural unemployment rate is at 7.30 %
in February, 2023.

On the external front, according to provisional data released by the Ministry of Commerce, India’s
merchandise trade deficit eased to one-year low of USD 17.7 billion in January 2023. Trade deficit had
ballooned to an all-time high of USD 29.3 billion in September 2022. It started shrinking in the following
months. This is the first time in nine months that the deficit dropped below USD 20 billion.

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