India’s consumer price inflation hits eight-year high on food and energy costs

By Manoj Kumar and Aftab Ahmed

NEW DELHI (Reuters) – Rising food and energy prices pushed India’s annual retail inflation to an eight-year high in April, bolstering economists’ view that the central bank should raise interest rates more aggressively to rein in prices.

Consumer prices rose around the world as Russia’s invasion of Ukraine pushed crude oil and food grain prices to record highs, prompting many central banks to raise rates of interest.

Inflation based on the consumer price index rose more than expected to 7.79% in April year-on-year, remaining above the Reserve Bank of India’s (RBI) 6% tolerance band. ) for a fourth consecutive month, according to data released by the Office for National Statistics showed on Thursday.

The April print was higher at 6.95% the previous month and 4.23% a year ago. Analysts had forecast retail inflation at 7.5%, according to a Reuters poll.

Chart: India’s Retail Inflation Highest in Nearly 8 Years – https://graphics.Reuters.com/INDIA-INFLATION/INDIA/egvbklgkdpq/chart.png

The RBI’s Monetary Policy Committee (MPC), which raised the key rate by 40 basis points to 4.40% at an unscheduled meeting earlier this month, will consider further interest rate hikes when its June meeting, a source familiar with the matter told reporters. Wednesday.

The next RBI MPC meeting is scheduled for June 6-8.

Sakshi Gupta, senior economist at HDFC bank, said inflation is expected to remain above 7% for the next six to seven months.

“The RBI is likely to respond with a rate hike at the June meeting of 25-35 basis points (bps) and follow it up with further rate hikes taking the repo rate to pre-pandemic levels of 5 .15%,” she said.

HARD TIMES FOR CONSUMERS

Rising food prices have become a major concern for consumers – already hard hit for two years of the pandemic – as prices for edible oil and vegetables jumped amid fears of lower food prices. wheat production this year.

India’s annual headline retail inflation was 8.33% in May 2014 when Prime Minister Narendra Modi took charge and promised to lower prices.

Rising cost of living in India has forced millions of parents to withdraw their children from private education https://www.Reuters.com/world/india/indias-private-school-aspiration-increasingly-out-reach- inflation-bites- 2022-05-03 to public schools, or from elite schools to less expensive ones.

Food prices, which account for almost half of the consumer price index (CPI), rose 8.38% year-on-year in April, from 7.68% a month earlier, pushed by rising prices for edible oils and vegetables.

A nearly 4% depreciation of the rupee against the dollar this year has also made imported items more expensive.

The Indian rupee hit a new high of 77.63 against the dollar before paring losses to end at 77.42 after central bank intervention.

The NSE Nifty 50 Index and the S&P BSE Sensex both closed down more than 2% as inflation fears and further interest rate tightening rattled markets.

Retail prices for gasoline, diesel and cooking gas have risen 10% since mid-March, while many businesses have passed on higher input costs such as transport, imported raw materials to consumers.

Core CPI inflation, excluding volatile food and energy prices, was estimated between 6.8% and 7.1% in April, by three economists, compared to 6.30% in April. 6.32% the previous month.

“With rising food and fuel prices, it is becoming more and more difficult to meet household expenses,” said Nadeem Khan, a salesman at food delivery company Swiggy.

(Reporting by Manoj Kumar and Aftab Ahmed; Additional reporting by Nallur Sethuraman in Bengaluru; Editing by Raissa Kasolowsky, Bernadette Baum and Hugh Lawson)