Retail Inflation: For the second consecutive month, India’s retail inflation in April remained within the Reserve Bank of India’s acceptable range, largely due to moderatingly declining food costs. According to data issued by the National Statistics Office (NSO), consumer price index-based inflation (CPI) slowed to an 18-month low of 4.7%. Retail inflation was 5.66% in May 2023 and 6.44% in February 2023, respectively.
Decline in food costs leads to a sharp drop in India’s retail inflation in April
The substantial decline in food costs in April was the cause of the sharp decline in retail inflation. From 4.79 percent in March, the inflation rate for food has decreased to 3.84 percent. The report also showed that in April, rural inflation was 4.68 percent, compared to urban inflation of 4.85 percent. The decline in retail inflation substantially matches economists’ predictions. The central bank, which maintained key rates steady in its most recent policy review following consecutive hikes, is relieved by the development. With this, the RBI is probably going to stop raising rates for the rest of the year.
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Concerns about Future Inflation and Industrial Output
Meanwhile, researchers have noted that the trend of reducing inflation may reverse itself after May. “We are looking at April and May being the bottom for inflation,” said Upasana Bhardwaj, chief economist at Kotak Mahindra Bank, “and then we start seeing slight upward movement above 5%, although below the RBI’s 6%.” “In terms of inflation, the immediate future is favourable. However, the RBI will eventually need to aim for real rates that are higher than 1%. They’ll need to take a break for that to continue. It could be a little early to start a rate-cutting cycle right now, Bhardwaj added. According to government statistics, the Index of Industrial Production (IIP), a gauge of industrial output, fell from 5.6% in February to 1.1% in March.
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