Retail inflation eases marginally to 4.83% in April, but food prices continue to rise

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India's core retail inflation remained largely unchanged at 4.83 percent in April, according to data released by the Ministry of Statistics and Program Implementation on May 13.

Consumer Price Index (CPI) inflation stood at a 10-month low of 4.85 per cent in March.

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Even though inflation fell to an 11-month low in April, it will be the 55th consecutive month that it has been above the RBI's medium-term target of four per cent. The central bank is keen to bring it to the target on a sustainable basis.

However, the inflation print for April came in slightly above economists' expectations. A moncontrol The survey pegged the CPI at 4.80 percent.

Nevertheless, the decline in the core retail inflation rate in April was limited by food and beverage prices, which stood at 7.87 per cent, up from 7.68 per cent a month earlier.

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Mainly, a 4.24 per cent contraction in fuel and mild inflation helped keep the CPI rate within the Reserve Bank of India (RBI)'s tolerance range of 2-6 per cent for the eighth consecutive month.

Like fuel, clothing and footwear as well as housing inflation also eased slightly on a month-on-month basis in April to 2.85 per cent and 2.68 per cent respectively.

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According to DK Srivastava, chief policy advisor at EY India, core inflation, which excludes volatile components like food and fuel, edged downwards at 3.2 per cent, the lowest in the 2012 base CPI series.

April CPI Internal

Food inflation index rose marginally to 8.7 per cent in April, compared to 8.52 per cent in the previous month.

Meat and fish prices stood at 8.17 per cent as against 6.36 per cent a month ago and fruit prices stood at 5.22 per cent as against 3.07 per cent in March. Meanwhile, a slight declining trend was seen in vegetables and pulses.

“CPI came in at 4.83 y-o-y in line with expectations. All broad indices apart from food prices are well controlled. Overall in line with RBI trajectory and hence there may be no material impact on policy or markets,” According to Akhil Mittal, Senior Fund Manager-Fixed Income, Tata Asset Management.

Although inflation related to vegetables and pulses declined sequentially, it remained in double digits in April.

ICRA fears that food and beverages inflation will reach above 8 per cent in May 2024, partly due to an unfavorable base as well as above-normal temperatures and heatwave conditions during the summer season, which Will carry the headline forward. Chief Economist Aditi Nair said that CPI inflation in the current month is at a five-month high of 5.1-5.2 percent.

Given persistent food inflation, some economists expect the RBI to continue its current stance of keeping policy rates on hold.

According to Upasana Bhardwaj, Chief Economist at Kotak Mahindra Bank, “The headline and core inflation readings unchanged from last month will continue to provide comfort to the Monetary Policy Committee. However, the overall sentiment should remain cautious due to irregular weather and heat waves. We are not hopeful at this time.” There has been a significant change in the RBI narrative as a prolonged pause in policy rates remains the base case.

The RBI in April decided to keep its key lending rate unchanged at 6.5 per cent for the seventh consecutive time, with Governor Shaktikanta Das highlighting volatility in food inflation as a hindrance to the ongoing disinflation process.

According to the latest forecast of the Central Bank, CPI inflation in the current financial year is seen at 4.5 percent.

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