India’s annual retail inflation reached an 18-month low in April, staying comfortably below the upper tolerance limit set by the Reserve Bank of India (RBI) for the second consecutive month. The easing of inflation was primarily driven by a decrease in food prices. Government data revealed that annual retail inflation dropped to 4.7% in April from 5.66% in the previous month, marking the lowest reading since October 2021 and coming in lower than Reuters’ forecast of 4.80%. The RBI aims to maintain inflation within a range of 2% to 6%.RBI Governor Shaktikanta Das expressed confidence in the central bank’s monetary policy, stating that the April inflation figure provided a reasonable amount of assurance.
Food inflation, accounting for nearly half of the consumer price basket, moderated further to 3.84% compared to the previous month’s 4.79%. Core inflation, which has been a concern for policymakers, remained below 6% for the second consecutive month, estimated at 5.2% in April.The decline in food inflation, gradual moderation in core inflation, and support from a favorable base effect in fuel inflation were attributed to the overall decrease. Vegetable prices fell by 6.5%, while edible oil prices dropped by 12.33%, offsetting the rise in cereal and milk prices.
Economists expect inflation to remain below 6% in the coming months, although a slight increase from April levels is anticipated.As a result of easing inflation risks, economists predict that the RBI’s Monetary Policy Committee (MPC) will maintain a “pause” on interest rate adjustments at least until the end of 2023. Last month, the RBI surprised the markets by keeping its key repo rate unchanged after six consecutive hikes, aiming to support the economic recovery in India, the third-largest economy in Asia.