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Retail inflation based on the Consumer Price Index (CPI) for April is expected to be around 5 per cent or even below that, most of the economist say. The Government will release the retail inflation later on Friday evening along with industrial growth based on Index of Industrial Production (IIP).
If inflation rate is around 5 per cent, this will guide the Monetary Policy Committee (MPC) to continue with pause in June when it meets to review the policy on June 6 while resolution will be announced on June 8.
Retail inflation was 5.66 per cent in March 2023 and 7.79 per cent in April 2022. If the retail inflation in comes around 5 per cent, it will be lowest after 4.91 per cent of November 2021.
Aditi Nayar, Chief Economist with ICRA estimates inflation to come down around 5 per cent mainly on account of “fairly broad-based drop on high base.” Echoing the same, Devendra Kumar Pant, Chief Economists with India Ratings & Research (Ind-Ra) says most of commodities are seeing downward trend in prices. Vegetable prices have also dropped. These along with other likely to see inflation at around 5 per cent.
The research report by SBI Ecowrap expects the CPI and core CPI inflation rates for April 2023 to be at 4.8 per cent and 5.6 per cent, respectively. These rates are lower than the current Repo Rate of 6.5 per cent. The report also notes that the CPI and core CPI inflation rates have been lower than the Repo Rate until November 2019. However, the trajectory of CPI and core CPI inflation rates has been above the repo rate since November 2019, and April 2020, respectively.
When this happened, RBI could not act instantly due to the onset of the pandemic, which may have culminated into continuing and non-transitory inflation, making it difficult to deal with. However, with the continued efforts of the RBI in controlling inflation, it is observed that both CPI and core CPI inflation have been going below the repo rate since February 23. With the March 2023 CPI and core CPI inflation coming in at 5.66 per cent and 5.74 per cent respectively, the same has been affirmed once again in Machr 2023.
According to Vivek Rathi, the Director Research at Knight Frank India, the moderation of inflationary expectations was a key variable behind the unanimous MPC decision in April to pause the policy repo rate hike. “We expect this moderation in inflation will further augment the proposition of benign interest rates and focus on economic growth, which together will also comfort the housing market consumers and developers,” he said.
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