NEW DELHI: Pricier vegetables pushed up retail inflation into double digits in April, but core inflation remained steady, in line with the trend in wholesale inflation.
Driven by higher prices of vegetable, edible oil and milk products, retail inflation rose to 10.4% in April, from 9.4% in March, data released on Friday showed. Reading for March was revised down to 9.38%, from 9.47% estimated initially.
“We expect food inflation to remain elevated due to a likely rise in minimum support prices for food crops and risk of a below-normal monsoon,” Nomura economist Sonal Varma said in a note.
Core inflation, a measure of demand in the economy, moderated to 10.6% in April, from 10.8% in March. Core inflation excludes volatile fuel and food elements.
Consumer Price Index (CPI), a national measure of retail inflation, was launched in January last year. The lack of historical series for CPI leaves wholesale price inflation as the most widely followed measure of inflation.
Wholesale price index-based inflation rose to 7.32% in April, from 6.95% in March.
“The CPI is a new index, and given the absence of trends/seasonal effects, it’s unlikely to be currently used as a key determinant of monetary policy,” wrote Rohini Malkani of Citi in a note, adding that she expected one more rate cut this year because of the pressure on prices.
The higher consumer inflation is largely because of the larger weight for food items in the retail basket. Food items have a 47.6% weight in the retail basket.
“In terms of policy response, while core WPI inflation has moderated and growth continues to weaken, the Reserve Bank of India ( RBI) cannot ignore rising food inflation since it affects households’ inflation expectations,” Varma said.
The weaker rupee and the likely fuel price rise could harden inflation further.
The Reserve Bank of India had cut repo rate by 50 basis points in its mid-monetary policy review to revive growth, but may not be able to do more even as industrial production contracted 3.5% in March.
At 11.1%, urban retail inflation was higher than 9.9% rural inflation. The difference is largely because rural index does not include housing.
Inflation rates for urban and rural areas were 10.3% and 8.7%, respectively in March.
Consumer prices of vegetables were up 24.6% in April, while edible oils rose 17.6%, and milk was up 14.9% in April from a year ago.
Prices of egg, fish and meat shot up 10% while non-alcoholic beverages became costlier by 9.5%.
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