Retail inflation soars to near 8-year high at 7.8%


April CPI inflation, spurred by higher fuel consumption, food costs, with CPI for groceries up 8.4%

April CPI inflation, spurred by higher fuel consumption, food costs, with CPI for groceries up 8.4%

Inflation facing Indian consumers rose to a nearly eight-year high of 7.8% in April from 6.95% in March, with rural inflation accelerating to 8.4% and urban shoppers posting a monthly acceleration of nearly 1 percentage point to 7.1% recorded, shows data released by the National Bureau of Statistics on Thursday.

Food costs led the rise, with inflation as measured by the Consumer Food Price Index (CFPI) coming in at 8.4%, up from 7.7% in March. Food prices rose faster in rural India by 8.5%. This is the fourth month in a row that retail inflation has been above 6%, which is the upper tolerance level for inflation within monetary policy.

Food inflation was significant at 8.4% as grain inflation was high due to higher wheat prices, said Madan Sabnavis, chief economist at the Bank of Baroda, pointing to the increasing diversion of grain for export as a cause of the country’s shortages.

Economists said the sharp acceleration in retail inflation explained the central bank’s rush to hike rates at an off-cycle meeting last week, adding that the move is likely to be backed by another rate hike at next month’s forthcoming monetary policy review .

While the Treasury Department did not immediately react to April’s inflation numbers, it said in a report released earlier in the day that the risk of persistently high inflation for India was “low” as demand recovery remained slow. India’s inflationary experience has not been as bad as that of some advanced nations, and rising prices have had less of an impact on low-income households in the country than high-income households, the ministry claimed in its monthly economic report.

Transport and communications inflation, which reflects fuel prices for cars, sped to 10.9%, up almost 300 basis points from the previous month’s 8%. Food and beverage inflation accelerated to 8.1% in April from 7.47% in March, mainly due to an acceleration in vegetable inflation to 15.4% from 11.6% in March. The pace of oil and fats price growth slowed slightly to 17.3% from 18.8% in March. Meat and fish inflation also cooled somewhat in April to around 7% from 9.63% in the previous month.

The cost of clothing and footwear continued to be a bugbear for households, with combined inflation in April at 9.85% versus 9.4% in March, with footwear prices up 12.12% and clothing costs up 9.5% . Mr. Sabnavis said prices for finished goods such as personal care and household products are unlikely to fall any time soon.

Retail inflation in April was the highest in 95 months, ICRA chief economist Aditi Nayar noted, adding that it was well above the agency’s estimate of 7.4%. “A sharp but expected surge in food inflation has propelled the headline figure higher even as core inflation has been at rather uncomfortable levels. The negative surprise was largely due to miscellaneous items, fuel and lights, and clothing and footwear, raising the specter of inflationary pressures generalizing,” she noted.

Among the states, West Bengal and Madhya Pradesh recorded inflation rates much higher than the national average at 9.1%, followed closely by Telangana and Haryana, which reported inflation at around 9%. In contrast, Kerala (5.08%) and Tamil Nadu (5.37%) recorded the lowest inflation rates in April.

While ICRA’s Ms Nayar said she expected the inflation rate to cool in May due to base effects, it was likely still hovering above 6.5%.

“Early data for May 2022 showed a sustained sequential upward trend in average cooking oil, atta and wheat prices, reflecting the fallout from global supply disruptions triggered by geopolitical conflict, including Indonesia’s palm oil export ban. In addition, the average prices of some vegetables such as tomatoes, potatoes, ginger, iodized salt and fruits such as apples and papayas have increased,” Ms. Nayar noted.

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