India’s annual consumer price inflation surged to 10.36% in April from 9.38% in the previous month on dearer food and fuel and clothing items,highlighting lingering price pressures in the economy and adding to pressure on the central bank to pause on monetary easing.
Overall retail inflation in rural and urban areas touched 9.86% and 11.10%,respectively,in the last month as protein-based food items,edible oils,fuel and clothing turned more expensive,showed the data released by the ministry of statistics and programme implementation on Friday. The consumer inflation exceeded the wholesale price rise of 7.23% in April.
Vegetables led the pack with a price rise of 24.55% last month,while edible oil and fat items gained 17.63%. Milk and milk products–with a combined weight of 7.73% in the CPI basket–spiked 14.94% in April from a year before,and egg,fish and meat surged 9.95%.
The consumer inflation in fuel and light,which has a 9.49% share in the overall basket,jumped 11.40% in the last month,while clothing,bedding and footwear witnessed a price rise of 11.95%.
The surge in retail prices followed by a spike in wholesale inflation last month dashed hopes of any further rate cut by the central bank at its review meeting in June. The Reserve Bank Of India (RBI) last month cut the main lending rate by an unexpectedly sharp 50 basis points for the first time in around three years to prop up the economic growth,but warned of limited scope to reduce the rates further citing “upside risks” to inflation.
Some analysts have said underlying inflationary pressures despite softening real economic activities had raised fears of stagflation–a situation marked by high inflation,low growth and wide-scale unemployment. The economy witnessed slowdown in growth to 6.1%in the December quarter and a 3.5% contraction in industrial production in March following a slump in manufacturing,mining and capital goods output.
Some others say the surge in prices reflects pressure from the weakening rupee and supply-side constraints rather than excess demand. Last week,Prime Minister’s Economic Advisory Council chairman C Rangarajan said the widening inflation rate differential between India and developed countries were adding to the erosion of the rupee’s value.
A more than 11% depreciation of the rupee against the dollar since end-March has pressured imports of key items such as crude and vegetable oil,and persistent concerns about the weakening currency have stoked fears of continued “imported inflation” in months to come. Moreover,the usual shrinking of supplies of fruits and vegetables during the summer means price pressure on food prices will continue in the coming months as well. Earlier this week,finance minister Pranab Mukherjee said food prices were a matter of concern and the government would step in to ease supplies.