Retail inflation in the country hit a 11-month low in April 2024 at 4.83 per cent, slightly lower than the March 2024 print of 4.85 per cent.

The latest consumer price index (CPI)-based inflation print is, however, higher than the April 2023 level of 4.70 per cent, data released by the Ministry of Statistics & Programme Implementation (MOSPI) showed.

A comforting factor is that the ongoing seven-phased General Elections has so far had no impact on the headline inflation number, although this was a concern at some point of time.

The April 2024 retail inflation print of 4.83 per cent may not materially move the needle for a change of stance at the Monetary Policy Committee (MPC) meeting in June, said economists.

For the month under review, rural inflation stood at 5.43 per cent (5.51 per cent in March 2024) and urban inflation came in at 4.11 per cent (4.14 per cent in March 2024). RBI’s Monetary Policy Committee (MPC) has a CPI inflation target of 4 per cent, with a range of 2-6 per cent. Core inflation softened to its lower ever level of 3.2 per cent in April 2024, from 3.3 per cent in the previous month.

Food inflation

The slight moderation in overall CPI inflation for April 2024 can be attributed to deflation in fuel inflation and some decline in core inflation. However, food inflation inched up in April 2024 to 8.72 per cent from 8.52 per cent in March 2024.

Inflation in the food and beverages group continued to be sticky and inched up to 7.9 per cent in April 2024 from 7.7 per cent in March 2024. Inflation in vegetables came at 27.8 per cent and pulses at 16.84 per cent in April 2024 – both categories remained in double-digits for the sixth and eleventh consecutive months, respectively.

Madan Sabnavis, Chief Economist, Bank of Baroda, said the heat wave effect has just about been seen in vegetable inflation at 28 per cent in April 2024, and will get exacerbated in May too.

“Cereal and pulses will continue to witness high prices until the next crop comes in and any changes in the downward direction will be more due to base effect rather than prices coming down as stock levels come down in the market,” he added.

Sabnavis said that rural inflation is higher than urban due to the higher share of food products. In urban areas, consumption of food items also tends to be of a different variety, with processed foods being included, where price rise is of a lower magnitude, he said.

Aditi Nayar, Chief Economist, Head Research and Outreach, ICRA Ltd, said, “With continued uncertainty, especially on the risks to the food inflation trajectory after Q2 FY2025, the chance of a stance change in the upcoming June 2024 monetary policy review appears rather dim”.

Meanwhile, reacting to the latest retail inflation print, Sanjeev Agrawal, President, PHD Chamber of Commerce and Industry, said proactive measures by the government to strengthen supply chains are leading to softening in inflation in many items.

“Going forward, the inflation trajectory is expected to become normal by September/ October 2024 as many kharif crops will enter the mandis and supplement the existing supply,” Agrawal said.

Dharmakirti Joshi, Chief Economist, Crisil, said a mild easing of the headline number in April 2024 is encouraging, but acceleration of this downtrend is what matters, especially since recent swings have been worrying.

Food inflation, which has a 39.1 per cent weight in the CPI gauge, has remained well above 8 per cent for six months now. Pressure on food prices continues, including due to the ongoing heat waves.

“Our base case is that the upcoming monsoon rains can offer respite, assuming they are well distributed in terms of time and geography,” Joshi said. “Net-net for fiscal 2025, we expect CPI inflation to broadly ease this fiscal to 4.5 per cent from 5.4 per cent last fiscal”.

He said that core inflation, with a weight of 47.3 per cent, has been low for most of this period, but the expected rise in commodity prices, together with a low base effect, will put upward pressure on core inflation in the current fiscal.