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Last Updated : May 13, 2019 07:34 PM IST | Source: Moneycontrol.com

India's April retail inflation at 2.92% vs 2.86% in March

Core CPI for April contracted to 4.6 percent from 5 percent in March.

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India's retail inflation stood at 2.92 percent in April, higher than 2.86 percent in March.

Core CPI for April contracted to 4.6 percent from 5 percent in March.

"The softening trend is merging into the core inflation. This is happening because of primarily two reasons. First, a sequentially weaker demand condition and two, the series on core now carries no noise of service tax implications," said Shubhada Rao, chief economist at YES BANK.

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Core inflation was firming up when a change in the service tax regime was introduced. "Now we have a noise free series. Also, a relatively weaker demand condition doesn’t allow pricing power among manufacturers to get restored. That is also kind of corroborated by the PMI input output series," said Rao.

The latest price data released by the Central Statistics Office showed that consumer price index (CPI)-based inflation, which measures changes in shop-end prices, remained comfortably within the Reserve Bank of India's target level of 4 percent.

Food prices, which is a gauge to measure changes in kitchen budgets, grew 1.1 percent in April compared to 0.3 percent in March. Inflation rate in cereals and products stood at 1.17 percent in April as against 1.25 percent in March. Vegetables inflation stood at 2.87 percent in April versus -1.49 percent in March.

Pulses inflation in April contracted 0.89 percent as against a contraction of 2.25 percent in March. Fuel and light inflation stood at 2.56 percent in April, up from 2.42 percent in March.

Housing inflation in April was at 4.76 percent, down from 4.93 percent in March, while clothing & footwear inflation was at 2.01 percent in April, down from 2.59 percent in March.

The softening trend in inflation in inflation opens up another room for a rate cut up to August. "The growth conditions may warrant a June rate cut but there are two riders there. One is the monsoon performance. And two, we have an OPEC meeting coming up in June. So between these two, if there is view from RBI that let’s be cautious, then they may wait out the June rate cut and affect one in August," said Rao.

Going forward, the second half of the current fiscal year may be conducive to growth.

"In the first half if we have a liquidity stance which is neutral to positive, as well as a rate cut, the second half of the fiscal year would get growth supportive," said Rao.

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First Published on May 13, 2019 05:49 pm
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