Retail inflation, measured by the Consumer Price Index (CPI), rose to an 11-month high of 3.48% in April from 3.40% in March, primarily due to higher food prices, data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Tuesday showed. Rural inflation touched a 15-month high of 3.74%, while urban inflation stood at 3.16%.
Food inflation rose considerably to 4.20% in April. While overall food inflation witnessed a moderate uptick, at the item level, inflation cooled for potatoes, onions, peas and chickpeas. Items such as air conditioners recorded the lowest inflation rates during the month.
While retail inflation remained within the tolerance band of the Reserve Bank of India (RBI), economists cautioned that inflation could rise further if retail fuel prices increase in the coming months due to the West Asia crisis.
Debopam Chaudhuri, chief economist at Piramal Finance, said: “If retail fuel prices are revised upward in the coming months, the inflation trajectory could change meaningfully. The second-order effects of higher transport and logistics costs tend to transmit rapidly across a broad section of the inflation basket. Under such conditions, it appears unlikely that the overall cost of funds will ease materially anytime soon.”
However, there has been sharp inflation in precious metals due to rising global prices and rupee depreciation against the US dollar. Inflation in silver prices surged 144.34% year-on-year, while gold, diamond and platinum jewellery inflation rose 40.72%.
Rajni Thakur, chief economist at L&T Finance Ltd, said inflation in April was “better than expected across the board”. She noted that while food prices had increased by around 30 basis points, overall transportation prices had eased due to softer services inflation.
She added: “While food prices have nudged higher by around 30 basis points, overall transportation prices have actually eased. This is largely on account of easing prices for the services sector, while prices of transport of goods have increased by 7.6% in the month.”
She also cautioned that there could be some spillover from domestic price pressures in the coming months.