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April retail inflation eases to 4.29% on sharp fall in food prices

The fall in inflation rate was primarily on the back of a sharp decline in food inflation. Data by the National Statistical Office shows that Consumer Food Price Index (CFPI) inflation dropped to 2.02 percent in April from 4.87 percent in March.

May 12, 2021 / 07:45 PM IST

Consumer Price Index-based inflation (CPI) for April, 2021 came in at 4.29 percent, the lowest in three months, compared with 5.52 percent in March and is well within the Monetary Policy Committee’s medium-term inflation target range of 4 (+/-2 per cent), official data showed on May 12.

This is the fifth consecutive month that CPI inflation is within the MPC's target range. On March 31, the Centre gave the MPC an unchanged inflation target for 2021-22 to 2025-26.

The fall in inflation rate was primarily on back of a sharp decline in food inflation. Data by the National Statistical Office shows that Consumer Food Price Index (CFPI) inflation dropped to 2.02 percent in April from 4.87 percent in March.

Analysts said that the drop in inflation was due to lower demand of various items caused by regional lockdowns across states.

"Given the high base related to the supply disruptions seen during the nationwide lockdown in April 2020, the CPI inflation dipped to a three month low. Overall, the prevailing localised restrictions appear to have had a limited impact on prices in April 2021," said Aditi Nayar, Chief Economist with ICRA Ltd.

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The downward movement of inflation was primarily driven by a fall in the inflation rates for food and beverages and transport and communications, said DK Srivastava, Chief Policy Advisor at EY India.

"While a cost push inflation is still operating through petroleum prices, lower demand for food and beverages, clothing and footwear, transport and communications and miscellaneous goods have driven the overall inflation down," Srivastava said.

Among the main sub-groups, inflation rate for vegetables in April 2021 fell nearly 15 per cent year-on-year, while that of cereal and products fell nearly 3 per cent

"The policy message is that the government needs to support demand without getting excessively concerned about the pressure on prices of petroleum products," Srivastava said.

Nayar said that as the lockdown base fades away, she expects CPI inflation to bounce back to an average of 5 per cent in the remainder of first half of the fiscal year, ruling out the possibility of further rate cuts to support economic activity and sentiment.

"However, with the economic outlook remaining uncertain in light of the continuing pandemic, we expect the monetary policy stance to remain accommodative for much of 2021," she said.
Arup Roychoudhury
first published: May 12, 2021 05:40 pm

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