India records 11-month low retail inflation, no rate cut expected

In April, the cost of living in India, measured by the consumer price index, slightly dropped to its lowest point in 11 months, reaching 4.83%. This was helped by lower increases in essential items and fuel prices, even though food costs went up.

The National Statistical Office shared data showing that food prices jumped to 8.7% in April, with fruits, oils, cereals, meat, and fish being the main contributors. Although vegetable and pulse prices rose less compared to the previous month, they still increased by double digits.

Experts noted that the downward trend in inflation, which started in December 2023, continued in April. Despite food prices rising, other factors like fuel and transportation costs helped keep overall inflation in check. Core inflation, which excludes volatile items like food and fuel, also decreased to 3.2%, the lowest since 2012. If this trend continues, inflation for the first quarter of the financial year 2025 might be slightly lower than what the Reserve Bank of India projected.

Economists warned that rising temperatures could worsen the impact of inflation on vegetable prices in May, while cereal and pulse prices might stay high until the next harvest. Additionally, companies might increase prices for their products, potentially leading to higher inflation in certain sectors, like consumer goods. However, inflation in education and healthcare decreased due to various factors, including changes in tuition fees and hospital charges.

Besides domestic factors, global commodity prices, particularly industrial metals, rising by 20% in the past three months, could further elevate retail inflation risks in April 2024. However, core inflation for items like clothing, housing, and services like education and health remained below 3% in April.

In April, the RBI's monetary policy committee decided to keep the policy rate steady at 6.5% for the seventh time in a row. They also maintained their forecast for inflation for the current financial year at 4.5%. RBI Governor Shaktikanta Das highlighted the uncertainties surrounding food prices due to weather conditions but expressed optimism about wheat production helping to stabilise prices. He also emphasised the need for monitoring vegetable and pulse prices closely, considering the forecast of above-normal temperatures in the coming months.