India’s retail inflation softened marginally, hitting an 11-month low of 4.83 percent annually in April, down from 4.85 percent in the previous month, as per government data released on Monday. A Reuters poll of 44 economists had anticipated the figure to drop to 4.80 percent.
The figure has stayed within the Reserve Bank of India’s (RBI) acceptable range of 2-6 percent.
According to data from the National Statistical Office (NSO), inflation in the food basket increased to 8.7 percent in April, rising from 8.52 percent in March.
In April, the inflation rate sequentially stood at 0.48 percent.
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India’s year-on-year vegetable inflation was recorded at 27.80 percent, slightly lower than March’s 28.30 percent. Meanwhile, the inflation rates for cereals and pulses, which form a substantial part of India’s staple diet, were 8.63 percent and 16.84 percent, respectively.
During the announcement of the results of the first bimonthly Monetary Policy Committee (MPC) meeting of FY25, Reserve Bank of India (RBI) Governor Shaktikanta Das highlighted inflation as the primary challenge, metaphorically labeling it as “the elephant in the room.” Despite this, he expressed optimism by suggesting that inflation (the elephant) seems to be returning to the desired threshold (the forest) of 4 percent.
In his speech, Governor Das commented, “CPI inflation was the elephant in the room. Now, it seems the elephant has taken a stroll and is heading back to the forest.”
Das emphasized the declining trend of inflation, supported by favorable base effects. Nevertheless, he recognized the ongoing pressure from service prices, which has kept the key indicator elevated compared to the set targets.
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The headline inflation for January-February 2024 decreased to 5.1 percent, down from the 5.7 percent recorded in December. Nonetheless, the unpredictable fluctuations in food prices persist, adding to inflation uncertainties.
“Although headline inflation has decreased from its December peak, the persistent influence of food prices is hindering the continuous disinflation process, posing challenges to reaching the target,” remarked Das.
After a correction in January, food inflation rose to 7.8 percent in February, mainly driven by increases in vegetable, egg, meat, and fish prices.
Meanwhile, fuel prices continued their deflationary trend for the sixth straight month in February. The core Consumer Price Index (CPI), which excludes food and fuel, experienced disinflation, falling to 3.4 percent in February. This represents one of the lowest levels in the current CPI series, with both goods and services components seeing a decrease in inflation.
During its April 2024 meeting, the MPC maintained its inflation projection for the fiscal year at 4.5 percent, contingent upon a normal monsoon, despite the nation preparing for a hot summer amidst rising crude oil prices and ongoing concerns about the supply chain due to the Red Sea crisis.
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