Despite a slight easing, India’s inflation is expected to hover around 4.80% in April, held back by stubbornly high food prices, posing challenges to household budgets amid a persistent heatwave.
India’s consumer price inflation is anticipated to have moderated marginally in April, reaching approximately 4.80%, according to a Reuters poll of economists. This figure, while slightly lower than March’s rate, reflects the enduring impact of elevated food prices, which constitute a significant portion of the consumer price index (CPI) basket. With food inflation hovering around 8%, households continue to face budgetary constraints, exacerbating economic challenges.
The Reserve Bank of India’s recent bulletin highlighted the ongoing risk posed by food prices amidst the prevailing heatwave in various parts of the country. Despite efforts to mitigate inflationary pressures, particularly in the food sector, the latest data suggests that the trajectory remains stubbornly upward.
The Reuters poll, conducted from May 3-8, revealed a consensus among 44 economists that consumer price inflation is likely to dip slightly from March’s 4.85%. However, forecasts vary, with expectations ranging between 4.50% and 5.10%, indicating uncertainty about the extent of the decline.
Suman Chowdhury, chief economist at Acuite Ratings, emphasized the persistent nature of food inflation, asserting that a rapid decline in headline inflation is unlikely in the near term. This sentiment was echoed by V. Anantha Nageswaran, the government’s chief economic adviser, who emphasized the importance of fostering non-inflationary growth in the Indian economy.
While there are expectations of inflation returning to the Reserve Bank of India’s medium-term target of 4% in the next quarter, accompanied by a potential interest rate cut, factors such as robust economic growth and global monetary policy dynamics may influence the timing of such measures. Kunal Kundu, India economist at Societe Generale, underscored the limited impact of monetary policy on inflation, particularly in the context of supply-driven food inflation.
Looking ahead, analysts anticipate the possibility of the RBI announcing its first rate cut move during the fourth quarter of 2024, although the decision may be subject to further evaluation depending on evolving economic conditions.
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