Retail inflation soars to 7.79%

Mostly driven by rising fuel and food prices, India's consumer retail inflation surged to an 18-month high of 7.79 per cent in April, and stayed well above the Reserve Bank of India's upper tolerance limit for a fourth consecutive month. This is the highest ever inflation rate in the country since October 2020. Besides, India's factory output also witnessed a decelerating growth of 1.9 per cent in March, two separate government data showed on Thursday.

Inflation based on the Consumer Price Index (CPI) was 6.95 per cent in March this year and 4.23 per cent in April 2021.

As per the data released by the Ministry of Statistics & Programme Implementation, food inflation jumped to 8.38 per cent from 7.68 per cent in March.

The April inflation data, no doubt, is worse than expected. The RBI has been mandated by the government to keep retail inflation at 4 per cent with a margin of 2 per cent on either side. The elevated price outlook is likely to mount pressure on the RBI to consider more rate hikes in the coming days. Sources said the RBI may raise inflation projections again in the monetary policy committee (MPC) meeting next month and would also consider another rate hike to tame inflation which is above its comfort level.

In order to contain inflation going out of control, the RBI raised its key lending rate at an off-cycle meeting earlier this month. The move of the central bank came just ahead of the US Federal Reserve's 50 basis point rate hike later the same day. RBI Governor Shaktikanta Das had said the adverse effects of the unprecedented high global food prices due to the ongoing geopolitical situation are reflecting in the domestic market as well, and going forward inflationary pressures are likely to continue.

“Despite crude oil price cooling off from its peak levels in March, the cascading effect of increase in domestic fuel price is reflecting on the latest consumer inflation number. Besides, food inflation is also at an elevated level in the country and globally, which is a concern for the domestic economy," said Vivek Rathi, DirectorResearch

Knight Frank India.

Meanwhile, the country's industrial output, measured by the Index of Industrial Production (IIP), decelerated at 1.9 per cent in March compared to 24.2 in the same month a year earlier, according to the National Statistical Organisation (NSO).

"The manufacturing sector's output grew 0.9 per cent in March 2022, while the mining output climbed 4 per cent, and power generation by 6.1 per cent. During 2021-22, the IIP grew 11.3 per cent as against an 8.4 per cent contraction in 2020-21" the NSO release showed.

Industrial production has been hit due to the coronavirus pandemic since March 2020, when it had contracted 18.7 per cent. It shrank 57.3 per cent in April 2020 due to a decline in economic activities in the wake of the lockdown imposed to curb the spread of coronavirus infections.