Instant view: India's retail inflation eases to 4.83% in April

(Reuters) - India's retail inflation rate eased slightly in April, partly due to lower fuel prices, although food prices remained elevated, government data showed on Monday.

Annual retail inflation in April was 4.83%, down from 4.85% in March. Economists polled by Reuters had forecast April retail inflation at 4.80%.

Food inflation, which accounts for nearly half of the overall consumer price basket, rose 8.70% in April, compared with an 8.52% rise in the previous month.

COMMENTARY:

KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU

"While the IMD expects a normal monsoon this year, the longer-than-expected persistence of the heatwave will likely take a toll on food production in the early part of the year. Thus, while we do not expect any major uptick in headline inflation, the easing path is expected to be non-linear."

"This would mean that, despite a rather benign core inflation reading due to weak domestic demand conditions, the Reserve Bank of India's (RBI) focus on headline inflation would translate into policy rate remaining higher for longer."

MADAN SABNAVIS, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI

"CPI inflation came in almost unchanged at 4.8% and hence shows stability and will not turn the needle for the RBI when discussing inflation in the country."

"The heat wave effect has just about been seen in vegetable inflation at 28% and will get exacerbated in May too."

"Core inflation, which has been under control so far, can spring an upward surprise as companies have raised prices of their products."

"A comforting factor is that the elections have had no impact on headline inflation number, which was a concern at some point in time. We expect inflation to average 4.5-5% for the year."

ANKITA AMAJURI, ASSISTANT ECONOMIST, CAPITAL ECONOMICS, LONDON

"Looking ahead, we think that food price inflation will continue to drop back. Although extreme heat poses risks to the crop yield, the impending monsoon this year is expected to be above average and that should keep food prices under control."

"Meanwhile, core inflation should remain anchored by falling household inflation expectations. The upshot is that headline inflation will reach the RBI's 4% target by the middle of the year."

"We remain comfortable with our long-held view that the RBI will kick off its easing cycle in August, which would be earlier than the Q4 start that the consensus is now expecting."

ADITI NAYAR, CHIEF ECONOMIST, HEAD RESEARCH AND OUTREACH, ICRA, GURUGRAM

"ICRA fears that the food and beverages inflation will retrace above the 8.0% mark in May 2024, partly on account of the adverse base, as well as the above-normal temperatures and heatwave conditions during the summer season, which would push up the headline CPI inflation to a five-month high of 5.1-5.2% in the ongoing month."

"The impending favourable base effects during Q2 FY2025 are expected to materially soften the headline inflation print to 2.0-4.0% in July 2024 and August 2024."

"With continued uncertainty, especially on the risks to the food inflation trajectory after Q2 FY2025, the chance of a stance change in the upcoming June 2024 monetary policy review appears rather dim."

MADHAVI ARORA, LEAD ECONOMIST, EMKAY GLOBAL, MUMBAI

"Considerable uncertainty prevails in the food price outlook. Despite healthy progress in Rabi production, uneven seasonality in vegetable prices together with increasing incidence of climate shocks warrant careful monitoring."

"The RBI cannot do much to influence food supply management, but this puts pressure to stay vigilant on domestic dynamics."

"There is likely to be further easing of headline inflation in coming months before the unfavourable base effects kick-in the back half of FY25."

RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE

"For the central bank, firm growth alongside lower core inflation (below 3.3%) and contained inflationary expectations will continue to keep policy in a comfortable hold in the first half of the fiscal year."

UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI

"Unchanged headline and core inflation reading from the previous month will continue to provide respite to the monetary policy committee."

"However, erratic weather and heatwaves should keep the overall sentiment cautious. We do not expect much change to RBI's narrative for now as a prolonged pause in policy rates remains the base case."

VIVEK KUMAR, ECONOMIST, QUANTECO RESEARCH, MUMBAI

"Although the anticipated threat from a severe heatwave has so far not played out in a disruptive manner, food price pressures need to be on close watch due to their inherent volatility."

"A favourable outturn of monsoon, as indicated by the IMD's forecast of a 6% surplus rainfall in the upcoming south-west monsoon season, will douse food inflation risks and help guide headline inflation lower towards 4.5% in FY25."

GARIMA KAPOOR, ECONOMIST, INSTITUTIONAL EQUITIES, ELARA SECURITIES, MUMBAI

"The CPI inflation for April was in line with expectations and continued to signal comfort with respect to core prices."

"Recent correction in commodity prices especially crude oil has been supportive even as U.S. macro-economic data continues to point towards delayed start to the rate cut cycle."

"With global developments dominating the monetary policy reaction function, we do not expect the RBI's Monetary Policy Committee to cut rates in calendar year 2024. We expect the first rate cut in Q4FY25."

(Reporting by Anuran Sadhu, Ira Dugal, Swati Bhat, Manvi Pant, Chris Thomas, Navamya Ganesh Acharya, Dimpal Gulwani, Hritam Mukherjee, Nishit Navin in Bengaluru; Editing by Eileen Soreng)