‘High food prices may fuel inflation up to 7.7% in April’

Amid an out-of-turn hike in key coverage price and a surge in inflation flagged by the Reserve Bank of India (RBI), retail inflation based mostly on Consumer Price Index (Combined) is more likely to have risen as much as 7.7 per cent in April on the again of rise in meals costs and the total pass-through impact of gasoline value hike coming into play, economists stated.

Geopolitical tensions, warmth wave impacting meals costs, particularly of wheat, together with an total enhance in transportation prices attributable to gasoline value hike have added to the surge in inflation price, which had risen to a 17-month excessive of 6.95 per cent in March.

Bank of Baroda has estimated inflation for April at 7.2 per cent, whereas India Ratings estimated inflation to have risen to 7.25-7.5 per cent. ICRA’s estimates the April print to be 7.4 per cent, whereas Barclays estimates inflation to have risen to 7.5 per cent and State Bank of India sees it at round 7.5-7.7 per cent.

“We expect food inflation to rise to 7.8% in April, which would be the highest print in 17 months, from 7.5% in March. Despite prices of several key items like some vegetables and pulses moderating, this was likely offset by further rises in the prices of cereals, meat and fruits in April. Higher feed costs are also likely pushing up the prices of chicken and milk. Unsurprisingly, a lot of the sequential increases are likely being driven by edible oil prices, which continued to trend higher in April, and are set to rise further in May given Indonesia’s recent ban on edible oil exports,” Rahul Bajoria, Chief India Economist, Barclays stated.

“At the same time, both cooking gas and kerosene prices increased sharply in April. Revisions in electricity tariffs also likely pushed up power costs in some states, though a planned reduction in tariffs in Punjab should provide some relief in coming months. We expect this trend to continue through the year, as many state governments implement proposed power price revisions to support the distribution companies, under the union government’s reform directive,” Bajoria added.

Going forward, economists stated the worth trajectory shall be primarily depending on how lengthy the Russia-Ukraine battle lasts. “A monetary tightening is being seen across the globe. Inflation has turned structural in segments such as health. Also, the second round impact of fuel price hike will push up inflation. It depends a lot on how long the global uncertainty continues,” Devendra Kumar Pant, Chief Economist, India Ratings stated.

For the entire monetary 12 months, economists count on the inflation price to be greater than 6 per cent, which is over the higher band of the medium-term inflation goal of the RBI. “Food prices and generalised increase in prices will lead to higher inflation. The print in May is likely to soften due to a high base effect but for the whole fiscal, we estimate it to be higher than 6 per cent,” Aditi Nayar, Chief Economist, ICRA stated.

The RBI on Wednesday hiked repo price by 40 foundation factors amid worries over home meals costs given their sensitivity in India’s political financial system. The RBI signifies that prime frequency value indicators for April point out the persistence of meals value pressures. Simultaneously, the direct impression of the will increase in home pump costs of petroleum merchandise – starting the second fortnight of March – is feeding into core inflation prints and is predicted to have intensified in April.