Retail inflation eases slightly in April, food inflation rises

The economy showed signs of buoyancy in April, with retail inflation easing slightly to 4.83% in April, down from 4.85% in March, mainly due to falling fuel prices. However, food inflation remained elevated, data from the statistics ministry, released on Monday, showed.

India's consumer price index (CPI)-based retail inflation has been easing since December 2023, when it rose 5.69%. For January and February, inflation prints came at 5.10% and 5.09%, respectively.

A Mint poll of 22 economists had estimated India's retail inflation to remain broadly unchanged at 4.87% in April.

CPI inflation remained above the central bank’s target of 4% but has stayed within its tolerance range of 2-6% for the eighth consecutive month.

Overall, food inflation was 8.70% in April, up from 8.52% in March, and 8.66% in February, due to a rise in the prices of cereals, meat and fish, and fruit.

However, inflation was lower on vegetables, pulses, sugar and spices, as compared with the previous month.

Cereal prices rose 8.63% in April, against 8.4% in March.

Inflation in meat and fish was 8.17%, compared with 6.4% in the previous month, while egg prices rose by 7.08%, as against 10.3% in March.

During April, the prices of milk and milk products were up 2.97%, as compared with 3.38% in March.

While oils and fats declined 9.43% in April, as compared with an 11.7% decline in the previous month, vegetable prices rose 27.8%, against a 28.34% rise in March.

Food inflation, measured by the consumer food price index, accounts for nearly half of the overall consumer price basket. It stood at 8.3% in January and 9.53% in December.

Overall, food and beverage inflation rose 7.87% in April, compared with 7.68% in the previous month. Fuel and light inflation fell 4.24% in April, compared with a decline of 3.24% in March.

Inflation across other segments, which saw a lower price rise in April, as compared to March, included clothing and footwear, housing, household goods and services, health, transport and communication, education and recreation and amusement.

"Unchanged headline and core inflation readings from the previous month will continue to provide respite to the MPC (monetary policy committee)," said Upasna Bhardwaj, Chief Economist at the Kotak Mahindra Bank.

"However, erratic weather and heatwaves should keep the overall sentiment cautious. We do not expect much change to RBI’s narrative for now, as a prolonged pause in policy rates remains the base case," Bhardwaj added.

RBI left repo rate unchanged

During April, the Reserve Bank India (RBI) left the policy/repo rate unchanged at 6.5%, signalling that interest rate cuts may take more time.

The monetary policy committee of the RBI continued its prolonged pause in the key repo rate pursuing durable signs of easing inflation amid volatile food prices.

Regulating interest rates is a key instrument for the central bank to control inflation.

A higher interest rate regime makes borrowing costs more expensive, which can reduce demand among banks, other financial institutions and even the general public to borrow money.

Reducing the supply of money in the market can also bring down consumer spending.

Earlier during FY24, high inflation levels, especially food inflation, had prompted the government to take supply-side measures such as releasing substantial cereal stocks from reserves while proactively managing the imports and exports of pulses to ensure supplies.

The government had also restricted exports of rice and sugar to tame inflation.

“CPI inflation in April 2024 continues the downward trend since December 2023. It is the second successive month when inflation is below 5%. Although food inflation is marginally higher at 8.7%, the downward pressure emanates from petroleum-related commodity groups namely, fuel and light and transport and communication services," said D.K. Srivastava, Chief Policy Advisor at EYIndia.

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"Core inflation has also trended downwards at 3.2%, which is the lowest in the 2012 base CPI series. If this trend continues, CPI inflation in 1Q of FY25 may turn out to be marginally lower than RBI’s projection of 4.9%," Srivastava added.

Among states, Delhi and Uttarakhand reported the slowest retail inflation at 2.17% and 3.61%, respectively, during April, while Odisha (7.11%), Assam and Chhattisgarh (5.70%) recorded the fastest price rice.

However, 13 of the 28 states witnessed higher than average inflation, indicating retail inflation is still considerably high in several large states like Haryana, Madhya Pradesh, Telangana and Karnataka.

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