Retail inflation in the first month of the fiscal year was driven by a decline in food prices, showing official data released on Tuesday. The inflation rate based on the consumer price index (CPI) is 3.34% and 4.83% in April 2024.
Experts say this provides the central bank’s Monetary Policy Committee (MPC) room with rooms that reduce the benchmark loan rate to help improve the economy.
“There will be a 25 basis point reduction at the policy meeting in June, followed by a 25 basis point reduction in policy reviews in August and October,” said Aditi Nayar, chief economist at ICRA.
The team trimmed it to 25 basis points in February and April, before retaining it for about five years to curb price pressure. Nayal said that if the growth in gross domestic product (GDP) in the March quarter does not accelerate from 6.2% recorded in the previous three months, the MPC could even consider cutting 50 barrels in the June review. The official GDP figures will be released on May 30.
“Given the global economic and geopolitical environment, the RBI will choose a $2.5 billion cut,” said Paras Jasrai, deputy director of India Ratings and Research (IND-RA).
Vegetable prices fell 11% in April
Jasrai said easing food inflation will bring some relief to households and may stimulate consumer demand. Food inflation fell to 1.8% in April, the lowest since October 2021.
Sakshi Gupta, chief economist at HDFC Bank, said the continued decline in food prices, including vegetables, cereals and beans, has led to moderate retail inflation rates in headlines.
prospect
Many economists expect retail inflation to remain below 4% in the ongoing quarter.
“The inflation trajectory throughout the year has good expectations for monsoon and low commodity prices, with inflation expected to be 3.7% in fiscal 26,” Gupta said.
Although HDFC Bank report is expected to remain nearly 3% over the next two months, ICRA expects 3.5% in May.
“The rise in temperatures in northern India and non-seasonal rainfall in parts of the peninsula could lead to a surge in vegetable prices in the second half of May, which promoted the CPI inflation print,” Nayal said.
ICRA expects an average inflation rate of 3.5% in fiscal 26. Madan Sabnavis, chief economist at Varodata Bank, expects inflation to remain low in May and June due to the basic impact.
Urban and rural divide
Rural inflation fell to 2.9% in April from 3.3% in March, while in urban areas it remained at about 3.4%. In 8 of the 36 states and union territories, inflation rates were higher than the national average in April.
The inflation rate in Kerala was 5.9%, followed by Karnataka (4.3%), Jamu and Kashmir (4.3%), Punjab (4.1%) and Uttarakhand (3.8%).
Among the key projects, the highest inflation rate was observed in the case of gold (30.9%). The next oil was 23.8%, followed by silver (23.3%), mustard oil (19.6%) and apple (17%).
Food, service
Vegetable prices fell year-on-year in April, while pulse inflation fell by 5.2%. Tomato and potato prices fell by 33.2% and 12.7% respectively. In comparison, onion prices rose by 2.9%.
In food, oil and fat have the highest price of 17.4%, followed by 13.8% of fruit. Inflation for personal care and impacts was 12.9% in April, compared with 13.5% in March.
