Retail Inflation Eases To 4.29% In April On Decline In Food Prices

Retail inflation eased to 4.29 per cent in April 2021, owing to a drop in food prices, government data showed on Friday. The inflation rate was slightly higher than a poll conducted by news agency Reuters last week, which estimated that the retail inflation eased to 4.20 per cent in April from March’s four-month high of 5.52 per cent. The food inflation – or the inflation in the prices of food items dropped from 4.87 per cent in March to 2.02 per cent in April. The Reuters poll conducted with more than 50 economists, predicted the retail inflation in April just above the Reserve Bank of India’s four per cent mid-point target. (Also Read: Benign Food Prices Likely Dragged Retail Inflation To 3-Month Low In April: Poll )

The retail inflation easing to 4.29 per cent in April is well within the Reserve Bank of India’s comfort zone of two per cent – six per cent, for the fifth straight month. The central bank tracks the retail inflation – or the rate of increase in consumer prices as determined by the Consumer Price Index or CPI.

According to data by the National Statistical Office (NSO), the inflation in the ‘fuel and light’ category remained elevated at 7.91 per cent during the month, while the tobacco, pan, and intoxicants category registered an inflation rate of 9.01 per cent. 

Meanwhile, separate government data today showed that the factory output measured by the Index of Industrial Production (IIP) annually rose 22.4 per cent in March 2021, mostly led by the growth in the manufacturing sector. (Also Read: Industrial Production Grows 22.4% In March: All You Need To Know)

The minutes of the RBI’s Monetary Policy Committee’s April meeting showed that the members raised concerns about the upside risks to inflation, and raised the inflation projection for the first half of this fiscal year to 5.2 per cent. However, the central bank kept the repo rate at a record low of four per cent, saying it would ensure ample liquidity.

The Monetary Policy Committee led by the RBI Governor Shaktikanta Das, expected the gross domestic product (GDP) growth to be at 10.5 per cent for the current fiscal year 2021-22. (Also Read: RBI Monetary Policy Highlights: Repo Rate Steady, Growth Projection Retained At 10.5% )
 

What analysts say

“After hitting a four-month high in March, the CPI inflation for the month of April eased to 4.29 per cent, 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 Mr. Nish Bhatt, Founder & CEO, Millwood Kane International.

Aditi Nayar, Chief Economist, ICRA stated that given the high base related to the supply disruptions seen during the nationwide lockdown in April 2020, the CPI inflation dipped to a three-month low in April 2021, while printing somewhat higher than the expectations. Overall, the prevailing localised restrictions appear to have had a limited impact on prices in April 2021, she added.