The consumer-price index (CPI) based inflation has remained within the Reserve Bank of India’s (RBI) tolerance band of 2-6 per cent for the second consecutive month.
The number can be attributed to moderation in food and fuel prices apart from the low base effect. The easing price of cereals and vegetables in addition with lower energy prices have also pulled back the inflationary levels.
The consumer food price index (CFPI) eased to 3.84 per cent in April. Rural inflation stood at 4.68 per cent while urban inflation stood at 4.85 per cent.
Inflation rate for vegetables witnessed a contraction of 6.50 per cent in April. The inflation levels for ffood & beverage and fuel segments stood at 4.22 and 5.52 per cent, respectively.
India’s retail inflation was above RBI’s 6 per cent target for three consecutive quarters and had managed to fall back to the RBI’s comfort zone only in November 2022.
A Reuters poll of 53 economists had predicted the inflation to slow down to 4.80 per cent in April. “Predictions ranged from 4.40 per cent to 5.80 per cent, with respondents expecting inflation to remain below the RBI’s 6.00 per cent upper tolerance limit for the second consecutive month,” the poll results stated. March was the first month this year so far where India has seen a retail inflation reading below the 6 per cent RBI upper tolerance limit.
In an attempt to rein in the prices, the Reserve Bank of India (RBI) has so far hiked the benchmark repurchase rate by 250 basis points cumulatively since May 2022. In the last fiscal, which ended March 31, RBI projected average annual retail inflation at 6.5 per cent.
In a surprise move, the Monetary Policy Committee (MPC) recently decided to keep the repo rate unchanged at 6.50 per cent. At the press conference after the policy announcement, RBI Governor Shaktikanta Das said that the move “is a pause and not a pivot” because “MPC wanted to assess the impact of the cumulative 250 basis points hike in the policy rates since May last”.
Deputy Governor Michael Patra chipped in to reiterate that the pause is “valid only till 10 am on June 8, 2023, when the Governor will announce the next policy”.
The RBI in this meeting marginally cut retail inflation projection to 5.2 per cent in the current fiscal, but flagged adverse climatic conditions and rising uncertainty in international financial markets as future risks.
Although the expectation of a record Rabi harvest bodes well for easing of food price pressures, milk prices are likely to remain firm going into the summer season due to tight demand-supply balance and fodder cost pressures, RBI said.