India’s Retail Inflation Drops to an 11-Month Low
Subdued Inflation Figures for April 2024
India’s retail inflation has slightly eased to hit an 11-month low of 4.83% on an annual basis in April 2024, according to government data released on Monday. This number is marginally lower than the previous month’s 4.85% and closely aligns with the forecast of 4.80% from a Reuters poll. Importantly, it remains within the Reserve Bank of India’s (RBI) tolerance band of 2-6%.
Inflation Trends and Commodity Analysis
Food inflation in the basket rose to 8.7% in April from 8.52% in March, with a sequential inflation rate of 0.48%. While vegetable inflation decreased slightly to 27.80% year-on-year, cereals and pulses recorded rates of 8.63% and 16.84%, respectively. Notably, fuel and light inflation contracted by (-)4.24% in April 2024.
Shifts in Inflation Rates by Sector
Among the top five groups, inflation rates for ‘Clothing & Footwear’, ‘Housing’, and ‘Fuel & light’ decreased in comparison to the previous month. Clothing & footwear and the housing sector saw inflation rates of 2.85% and 2.68%, respectively.
RBI’s Perspective on Inflation
Reserve Bank of India (RBI) Governor Shaktikanta Das highlighted inflation as a significant challenge during the first bimonthly Monetary Policy Committee (MPC) meeting of FY25. He expressed optimism that inflation is heading back towards the desirable 4% threshold, driven by favorable base effects.
Other Economic Indicators
In February 2024, food inflation increased to 7.8%, influenced by vegetables, eggs, meat, and fish, while fuel prices continued a deflation trend for the sixth consecutive month. The core Consumer Price Index (CPI), excluding food and fuel, experienced disinflation, dropping to 3.4% in February.
Future Outlook and Concerns
In its April 2024 meeting, the MPC kept its inflation forecast for the fiscal year at 4.5%, assuming normal monsoon conditions. However, uncertainties persist due to rising prices and supply chain disruptions from the Red Sea crisis amid an expected hot summer.
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