As investors eagerly await the CPI numbers on 13 May 2024, projections indicate that India’s retail inflation is likely to remain stable at around 4.8% in April 2024. This forecast comes after a slight dip in March, attributed to lower gasoline prices. There is a possibility that the year-on-year inflation rate could touch 5.0% once again, although estimates from experts vary between 4.63% and 5.02%. Surprisingly, only a few analysts predicted a rise above the 5% mark. Despite this potential uptick, the projected inflation rate still falls below the upper limit of the Reserve Bank of India’s target range of 4% (+/-2%).
Factors Influencing Inflation Trends
The April 2024 data is expected to reflect a mix of seasonal food price increases, partially offset by the impact of lower retail gasoline prices witnessed in March. While there is anticipation of a rise in food prices compared to the previous month, the overall year-on-year inflation may not experience a significant surge in April due to a favorable base effect. The presence of price pressures, particularly in seasonal foods, could be counterbalanced by this favorable base effect. Additionally, core inflation, which excludes food and fuel prices, is projected to continue its recent trend of moderation.
Despite the recent stabilization, inflation in India remains above the RBI’s target of 4%, prompting continued vigilance from policymakers. RBI Governor Shaktikanta Das has highlighted concerns regarding the volatility of food inflation during the April 2024 monetary policy meeting, emphasizing the potential impact of supply-side disruptions on the inflation trajectory. As summer approaches, pressures are expected to increase on perishable food items, particularly vegetables. However, the forecast for an above-normal monsoon by the India Meteorological Department could provide some relief. Nonetheless, uncertainties related to weather patterns and geopolitical risks may pose challenges to the inflation outlook.
Looking ahead, core inflation, excluding food and fuel components, is anticipated to remain subdued in April 2024. However, there could be upward pressure on core inflation in the future due to rising global commodity prices. Investors have the opportunity to access InvestingPro at a significant discount of up to 69%, costing only INR 216 per month. This limited-time offer has attracted investors looking to enhance their investment strategies and capitalize on market opportunities.