India April retail inflation rate climbs for first time in four months
File Photo: A worker stacks food packets inside a retail outlet at a shopping mall in Kolkata August 12, 2014. REUTERS/Rupak De Chowdhuri
The Reserve Bank of India (RBI), due to hold its next policy meeting on June 6, is still widely expected to hold rates after having kept them unchanged for the fourth straight meeting in April.
But with a faster-than-expected pace of retail and wholesale inflation, some economists have changed their mind about the RBI’s next policy move.
“The Reserve Bank of India is likely to adopt a hawkish commentary in June,” said Radhika Rao, an economist at DBS Bank in Singapore.
India’s annual retail inflation accelerated in April to 4.58 percent, after easing for three straight months, government data showed on Monday, mainly driven by faster increases in food and fuel prices.
Core inflation, mainly reflecting firming up manufacturing prices touched 5.9 percent, at a 44-month high, economists estimated.
Analysts polled by Reuters had forecast April’s CPI inflation at 4.42 percent, compared with March’s 4.28 percent.
April was the sixth straight month in which inflation was higher than the RBI’s medium-term target of 4 percent.
India’s wholesale price inflation in April rose faster than expected, to 3.18 percent, separate data released by the Ministry of Commerce and Industry on Monday showed.
Annual retail food inflation, which contributes about half of the weight in the CPI index, rose 2.80 percent in April almost at the same level of 2.81 percent rise in the previous month.
Analysts worry that retail inflation could cross 5 percent mark in the next two to three months.
As the economy gathers momentum, capacity utilisation could tighten further, which will boost underlying price pressures, said Shilan Shah of Capital Economics in a note on Monday.
The biggest risk that Asia’s third-largest economy faces is rising crude oil prices, which hit $78 a barrel last week, their highest since November 2014 following prospects of new U.S. sanctions on Iran.
India meets 80 percent of its oil needs from imports.
The International Monetary Fund, however, expects India’s economic growth could rebound to 7.4 percent in fiscal year 2018/19 beginning April, from an estimated 6.6 percent in the previous fiscal year.