At 11-month low in April: Retail inflation eases slightly, rise in food prices continues

Overall, food and beverages inflation increased to 7.87 per cent in April from 7.68 per cent in March, with rise in cereals inflation (8.63 per cent in April from 8.37 per cent in March), meat and fish (8.17 per cent in April from 6.36 per cent in March). While vegetables and pulses inflation moderated marginally to 27.80 per cent and 16.84 per cent in April, respectively, they continued to be elevated. Economists said better agricultural output may help in reining in the high food inflation in the next few months but the fight from inflation is far from over as gauged by the high food inflation amid risks from heatwave, implying a wait-and-watch mode by the Reserve Bank of India on monetary policy.

“Although the headline inflation is heading closer to the 4 per cent inflation target of the MPC, the fight from inflation is far from over as gauged by the high food inflation. Along with that, close to 25 per cent of the total commodities in the CPI basket still have an inflation still above 6 per cent, this was at a five-month high. The IMD’s first stage rainfall forecast is likely to result in better agricultural output and thus may help in reining in the high food inflation in the next few months. Ind-Ra opines that an unfavourable base effect may push retail inflation to 5.0 per cent mark in May 2024. Given the structure of inflation currently, we believe that the central bank won’t be in a hurry for any monetary easing or stance change in 1HFY25,”  a note by India Ratings’ Principal Economist Sunil Kumar Sinha and Senior Analyst Paras Jasrai said.

Core inflation — non-food, non-fuel segment —  inched down to 3.23 per cent in April, the lowest in the 2011-12 base year series, from 3.5 per cent in March. “This is indicative of weak consumer demand conditions prevailing in the economy. The services inflation had dipped further to 2.8 per cent lowest since the data was available,” the India Ratings note said.

The headline inflation in April marked the 55th month of staying above the 4 per cent mark in the 4+/- 2 per cent band of medium-term inflation target set by the RBI. In the minutes of the Monetary Policy Committee released for the meeting held on April 3-5, RBI Governor Shaktikanta Das had said the gains in disinflation achieved over last two years have to be preserved and taken forward towards aligning the headline inflation to the 4 per cent target on a durable basis, while remaining cautious about food inflation risks which may hamper the disinflation process.

Going ahead, food inflation is expected to inch higher even as core inflation is expected to remain benign.