Retail inflation dropped to 4.29% in April, the lowest in last three months, according to the official data released by the ministry of statistics and programme implementation (MoSPI) on Wednesday. The dip in inflation was on back of a sharp decline in food inflation, experts believe. Consumer Food Price Index declined to 2.02% in April from 4.87% in March, according to the ministry data. The inflation fell to 4.06% in January, lowest since October 2019. Retail inflation rose steeply to 5.52% in March and 5.03% in February as food and fuel prices went up.
April’s inflation was within the Monetary Policy Committee’s medium-term inflation target range of 4 (+/-2 per cent). “Hitting a four-month high in March, the CPI inflation for the month of April eased to 4.29%, near the central point of the RBI target. The inflation figure is a result of the low base recorded last year, coupled with softening of food prices and stable fuel prices. The softening of inflation is a positive development for RBI, though the risk of inflation spike remains on the back of rising global commodity prices," said Nish Bhatt, founder and chief executive officer, Millwood Kane International.
“On the consumer inflation front specifically, CPI at 4.29% for April 2021 is mainly influenced by fuel and light and miscellaneous segments. However, expectation of normal monsoon and accommodative RBI stance does provide some comfort at this juncture when we as a nation battle to safely come out of the second wave with minimal damage to life and livelihood," said Vivek Rathi, director - research, Knight Frank India.
Meanwhile, the Index of Industrial Production (IIP) rose by 22.4% in March compared to a contraction of 3.4% in March. The increase is “due to favorable base along with improvement recorded in indicators such as core index, export growth, steel production along with increase in power consumption," YES Bank said in a report.
“Indian economy was coping well with the pandemic created challenges until the second wave of COVID-19 hit us hard in the month of April 2021. Hence, economic indicators relating to period before April, when most regional lockdowns were introduced, will not capture the present turbulence in on ground economic situation," said Rathi.
“IIP for March 2021 has recorded a growth of 22.4% mainly on account of base effect. With productions holidays and factory shutdowns announced during this second wave, we need to brace for greater impact going forward even as base effect of national lockdowns last year determine number movements,” he added.
Fitch Solutions earlier revised its inflation rate forecast to an average of 5% in FY22, up from 4.6% previously, due to elevated inflationary pressures. The elevated inflation “underscores our expectation for the RBI to keep its policy rate on hold," it said.