Retail inflation rises to 7.8%, highest in 8 years

NEW DELHI: Retail prices grew at 7.8% in April, the highest since the Narendra Modi-led National Democratic Alliance (NDA) government assumed power in May 2014, squeezing household budgets, potentially affecting consumer confidence, and setting the stage for more monetary action by the Reserve Bank of India’s Monetary Policy Committee (MPC) which raised the rate last week to combat spiking inflation. A rate hike will make loans, including consumer loans and mortgages, costlier.

The latest inflation numbers, driven by an increase in prices across categories, including food, will put further pressure on MPC to roll back the monetary easing which was announced after the Covid-19 pandemic dealt a body blow to the economy, and will increase the cost of loans for both companies and individuals.

The latest Index of Industrial Production (IIP) number, which measures factory output — it grew at just 1.9% in the month of March — suggests that the

Retail inflation jumped to 7.79%, the highest in eight years, and the fourth month running when CPI has stayed above the upper limit of RBI’S tolerance band of 6% 7.98% 4.23% 2.6% 10.8% 8.1%

greenfield economy is still struggling to find a sustainable recovery, making RBI’S task that much more difficult.

Experts believe that this combination of tepid economic activity and high inflation poses serious challenges for the Indian economy going forward. What could complicate matters further is the fact that a lot of the price outlook going forward will depend on the geopolitical situation, something beyond the control of both fiscal and monetary policy in the country. With aggregate demand still low, inflation is being fuelled by supply side issues, including a sharp rise in commodity prices caused by the Russian invasion of Ukraine.

Retail inflation, as measured by the Consumer Price Index (CPI) grew at 7.79% in April as compared to last April. This is 36 basis points — one basis point is one hundredth of a percentage point — higher than the 7.43% projection made by a Bloomberg poll of economists. The April inflation number is