(Reuters) – India’s annual retail inflation eased to 4.7% in April from 5.66% the previous month, government data showed on Friday.
A Reuters poll of 53 economists had forecast a rate of 4.80%.
Last month, India’s central bank surprised markets by holding its key repo rate steady after six consecutive hikes to tamp down inflationary pressures. Many economists expect it to remain on pause mode for the rest of the year to support the recovery in Asia’s third-largest economy.
COMMENTARY:
ADITI NAYAR, CHIEF ECONOMIST, ICRA, GURGAON
“We foresee a high likelihood of a pause from the MPC in its next meeting. However, a pivot to rate cuts appears quite distant.
“The timeliness and intensity of the monsoon onset would be known when the MPC meets at its next scheduled meeting in June 2023, which would feed into whether its CPI inflation projection of 5.2% for FY2024 needs to be modified.”
MADHAVI ARORA, LEAD ECONOMIST, EMKAY GLOBAL, MUMBAI
“There has been a shift in weightage of the RBI’s reaction function in favor of external policy dynamics, which will be influenced by the extent of global disruption and disinflation ahead.
“Besides, on the external sector, INR support emanating from material improvement in CAD/GDP outlook gives a further breather to the RBI.
“It appears the pause is for good, especially as the ex-ante real rates at ~1.4% gives comfort and flexibility on their supposed stance and actions.”
KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU
“Thanks to a sharply higher base effect, food inflation likely dropped below 4% for the first time in seventeen months.”
“Core inflation also dropped below 6% for the first time in eleven months. Although goods price inflation has peaked, prices continue to rise despite aggregate domestic demand being weak.”
DEVENDRA PANT, CHIEF ECONOMIST, INDIA RATINGS, DELHI
“The decline in retail inflation in April 2023 was on expected line. The extent of decline was more than our expectations.”
“Importantly, all broader commodity groups … witnessed a decline in retail inflation in April 2023. A lot of this was due to base effect, retail inflation in April 2022 was 7.8%, highest in FY23.
“Miscellaneous goods and service inflation declining to less than 5% and second consecutive month of decline in cereals inflation are two important aspects of April 2023 retail inflation, which is likely to keep inflation in check.
“Inflation in rest of FY24 is expected to remain range bound in 4.5%-5.0% range.”
VIVEK KUMAR, ECONOMIST, QUANTECO RESEARCH, MUMBAI
“April 2023 CPI inflation came in close to our expectation of 4.76%. The significant decline of 174 bps in headline inflation in last 2-months provides a big relief.
“A lack of flare-up of food inflation, gradual moderation in core inflation, and strong support from favorable base effect in case of fuel inflation has played key role.
“From a policy perspective, movement in headline towards the 4% target and a drop in core inflation to under 6% (after a gap of 10-months) would be comforting.
“Recent softness in commodity prices (esp. crude oil) along with hope of El Nino having a limited impact on monsoon could potentially provide a downside risk to our FY24 CPI inflation estimate of 5.3%.”
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
“Inflation came inline with our expectations at 4.7% driven by a high base effect from last year. On food, apart from pulses and products, most other categories showed a moderation.
“More encouragingly, core inflation has also continued its decline in the month — dropping to 5.2% in April.
“Going forward, while inflationary risks due to any weather related disturbances remain, for now this print should nudge the RBI to remain on pause in the June policy.”
SUVODEEP RAKSHIT, SENIOR ECONOMIST, KOTAK INSTITUTIONAL EQUITIES, MUMBAI
“Overall, the RBI will see this print favourably and remain on a pause in the June policy while maintaining a cautious outlook on inflation. We continue to pencil in repo rate to remain unchanged for an extended period subject to global growth prospects, central bank actions, and domestic growth prospects.”
UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
“We expect the RBI to stay on a prolonged pause in order to anchor inflationary expectations.”
GARIMA KAPOOR, ECONOMIST, INSTITUTIONAL EQUITIES, ELARA CAPITAL, MUMBAI
“High frequency data suggest that food price rise remains contained in May 2023 even as mercury levels in the country have shot up and global commodity prices including crude have been on a softer trajectory.
“With inflation risks easing, we expect MPC to remain on a ‘pause’ at least till end of CY2023.”
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
“While food segments will be vulnerable to weather-related risks over the next six months, passage of the post-pandemic reopening boost, lower commodities (including easing farm inputs) and normalisation in demand should help cap core readings.
“Domestic considerations besides, tentative calm in the global markets, helped by a US rate cycle likely slipping into an extended pause, lowers the likelihood that the RBI policy committee will return to hikes in this cycle.”
(Reporting by Chris Thomas, Ashish Chandra, Nandan Mandayam, Nishit Navin, Rama Venkat and Navamya Ganesh Acharya in Bengaluru; Editing by Nivedita Bhattacharjee)
