April CPI inflation boosted by higher fuel, food costs with Consumer Food Price Index up 8.4%
April CPI inflation boosted by higher fuel, food costs with Consumer Food Price Index up 8.4%
Inflation faced by Indian consumers rose to an almost eight-year high of 7.8% in April, from 6.95% in March to 8.4%, and urban shoppers rose nearly 1 percentage point to 7.1 on the month-on-month basis. experienced acceleration. %, according to data released on Thursday by the Office for National Statistics.
Inflation as measured by the Consumer Food Price Index (CFPI) rose to a 17-month high of 8.4% from March’s 7.7%. Food prices in rural India increased sharply by 8.5 percent.
This is the fourth consecutive month that retail inflation has remained above 6%, which is the upper tolerance limit for inflation under the monetary policy framework. Economists said a sharp pick-up in retail inflation explained the central bank’s rush to raise interest rates at an off-cycle meeting last week, adding that a further rate hike in a policy review coming next month would reflect the move. can be supported.
The key policy of EY India stated, “Driven by continued growth in global crude prices, which affect food, fuel and light, and transport and communication prices in the CPI basket, India’s April 2022 CPI inflation The 95-month high rose to 7.8%.” Consultant DK Srivastava. “It was long ago in May 2014 that CPI inflation was 8.3%,” he recalled.
In a note, India Ratings economists Sunil Kumar Sinha and Paras Jasrai wrote, rural inflation was also at an eight-year high, while many commodities reported the highest level in a long time. This includes miscellaneous goods and services (at a 115-month high of 8.03%) and education, which was at a 23-month high. He pointed out that inflation in healthcare is changing structurally, staying above 6% for 16 months.
Inflation in food and beverages, which has a 46% weighting in the overall consumer price index (CPI), rose to 8.1% in April, from 7.47% in March, mainly due to a rise in vegetable inflation to 15.4 percent from 11.6 percent in March happened because of , The pace of price increases in oils and fats declined marginally to 17.3% from 18.8% in March. Inflation in meat and fish also cooled slightly to around 7% in April, from 9.63% in the previous month.
Bank of Baroda Chief Economist Madan Sabnavis said that food inflation at 8.4% was significant as inflation in cereals was high, as Bank of Baroda Chief Economist Madan Sabnavis pointed to increasing diversion of food grains for exports due to shortage in the country .
Transport and communications inflation, which reflects automobile fuel prices, reached 10.9%, an increase of nearly 300 basis points from the previous month’s reading of 8%.
The government may consider using the additional fiscal capacity reflected in higher GST collections in April and 49% growth in direct tax collections in 2021-22 to reduce central excise duty rates on petroleum products to control inflation , suggested Mr. Srivastava. Some reduction in taxes and duties had to be done by the government to ease the price pressure, Mr. Sabnavis said.
The cost of clothing and footwear remained a bugbear for households, with a combined inflation of 9.85% in April, from 9.4% in March, a 12.12% increase in shoe prices and a 9.5% increase in the cost of clothing. Mr Sabnavis said prices of manufactured items like personal care and household products are not likely to come down any time soon.
ICRA Chief Economist Aditi Nair said the April retail inflation print had far outpaced the agency’s estimate of 7.4%. “A sharp but expected spike in food inflation pushed the headline figure forward, even though core inflation printed at an unpleasant level. The negative surprise was mainly due to miscellaneous items, fuel and light, and clothing and footwear, increasing the risk of generalization of inflationary pressures,” she said.
Among the states, West Bengal and Madhya Pradesh reported a much higher inflation rate of 9.1% than the national average, followed by Telangana and Haryana which reported inflation of around 9%. In contrast, Kerala (5.08%) and Tamil Nadu (5.37%) saw the lowest inflation rates in April.
While ICRA’s Ms Nair said she expects inflation to moderate in May due to the base effect, it is still likely to remain above 6.5%.
“Early data for May 2022 revealed a sustained gradual uptrend in average prices of edible oils, flour and wheat, reflecting the outcome of global supply disruptions triggered by geopolitical conflict, including palm oil export restrictions by Indonesia. Is. Besides, average prices of some vegetables like tomato, potato, ginger, iodized salt and fruits like apple and papaya have increased,” Ms Nair said.