Inflation news :
India’s yearly retail inflation rate slightly decreased to 4.83% in April from 4.85% the previous month, hitting an 11-month low and roughly aligning with market predictions of 4.8%. The moderation was partially attributed to lower fuel prices, although food costs remained high.
This marks the eighth consecutive month that inflation has stayed within the Reserve Bank of India’s (RBI) tolerance range of 2 percentage points around 4%, suggesting the central bank is likely to maintain its key interest rate. In March, Consumer Price Index (CPI) inflation hit a 10-month low of 4.85%. Vegetable Surge in prices decreased to 27.80% year-on-year, down from 28.30% in March. Furthermore, inflation rates for cereals and pulses, essential components of India’s diet, were recorded at 8.63% and 16.84%, respectively.
However, inflation rates decreased for vegetables, pulses, sugar, and spices compared to the previous month.Cereal prices saw an increase of 8.63% in April, up from 8.4% in March.Meat and fish inflation rose to 8.17% from 6.4% in the previous month, while egg prices increased by 7.08%, down from 10.3% in March.
In April, milk and milk products prices rose by 2.97%, compared to 3.38% in March.While oils and fats declined by 9.43% in April, down from an 11.7% decline in March, vegetable prices increased by 27.8%, compared to a 28.34% rise in March.
Food inflation, as measured by the consumer food price index, which accounts for nearly half of the overall consumer price basket, stood at 8.3% in January and 9.53% in december.Overall, food and beverage inflation rose to 7.87% in April, up from 7.68% in the previous month. Fuel and light inflation decreased to 4.24% in April, down from 3.24% in March.
Consumer Price Index:
Inflation across other segments, including clothing and footwear, housing, household goods and services, health, transport and communication, education, recreation, and amusement, saw lower price increases in April compared to March.
“Unchanged headline and core inflations readings from the previous month will continue to provide respite to the MPC,” said Upasna Bhardwaj, Chief Economist at 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 In April, the Reserve Bank of India (RBI) kept the policy/repo rate unchanged at 6.5%, indicating that interest rate cuts may take more time.
The RBI’s monetary policy committee continued its prolonged pause in the key repo rate, awaiting 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, reducing demand among banks, other financial institutions, and the general public for borrowing money.Reducing the supply of money in the market can also lower consumer spending.
Earlier in FY24, high inflation levels, especially food, prompted the government to take supply-side measures such as releasing substantial cereal stocks from reserves and proactively managing the imports and exports of pulses to ensure supplies.The government 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 EY India.
