Retail inflation inches higher at 4.58% in April vs 4.28% in March

India’s retail inflation came in at 4.58 percent in April from March’s 4.28 percent due to rise in prices of miscellaneous items such as education, household goods, personal care items as well as petrol and diesel prices, data released by statistics office showed.

Retail inflation, measured by Consumer Price Index (CPI) had fallen to 2.99 percent in April 2017.

CPI is the main price gauge that the Reserve Bank of India (RBI) tracks. March’s data is an indication that prices at a relatively safe distance from the apex bank’s upper tolerance level of inflation at 6 percent.

Last month, the RBI brought down its January-March (2017-18) inflation projection to 4.5 percent from at 5.1 percent earlier. It also slashed CPI inflation estimate to 4.7-5.1 percent in April-September, 2018-19 and 4.4 percent in the next half of the year, including the impact of house rent allowance.

Consumer food price inflation, a metric to gauge changes in monthly kitchen costs, grew 2.80 percent in April from 2.81 percent in March as compared with 0.61 percent growth a year ago.

Core inflation—comprising non-food and non-fuel components--hit 34-month high to 6 percent in April.

“The hike was largely driven by an upswing in core inflation, especially with a broad-based increase in services segment while marginal upside movements were seen in clothing and housing segments as well,” Richa Gupta, Senior Director and Senior Economist, Deloitte India, said.

Vegetables prices grew 7.29 percent in April as compared to 11.70 percent in March, while pulses continued to witness deflation and contracted (-) 12.35 percent in April from (-) 13.4 percent a month ago.

Fuel inflation, which has seen an uptick since July, grew at 5.24 percent in April as compared to 5.7 percent last month. Housing inflation came in at 8.50 percent in April versus 8.31 percent, month-on-month.

“Transport and communication inflation has increased to 4.5 percent, 13 months high, petrol and diesel for vehicles is part of this group. Increase in this group’s inflation is mirroring the movement of crude prices and currency value,” Devendra Kumar Pant, Chief Economist at India Ratings said, adding that housing and rising oil prices are likely to keep pressure on headline inflation in coming months.

According to experts, rise in global crude oil prices continue to pose threat on inflation index.

“The global rise in crude oil prices remains a key risk for the inflation trajectory. To what extent and with what time lag are the retail prices of petrol and diesel revised to reflect the prevailing crude oil prices, remains to be seen. The government may prefer to wait for additional information about the level at which the monthly GST revenues stabilise after the e-way bill introduction, before reducing excise duty on fuels,” Aditi Nayar, Principal Economist at ICRA said.

Yes Bank’s Chief Economist Shubhada Rao also higher inflation in with international crude prices firming up as well as MSP-led higher food inflation.

“We maintain our estimate for 2018-19 at 4.7 percent with upward bias. The positive support could come only if we have a solid monsoon performance giving a bumper food grain output,” Rao said.