Food inflation surged to a four-month high of 8.7% in April from 8.52% in March. Representational file image.
| Photo Credit: Reuters

Consumers faced a further acceleration in steep food prices in April, even as India’s overall retail inflation remained virtually unchanged at 4.83% last month, compared with 4.85% in March.

Food inflation surged to a four-month high of 8.7% in April from 8.52% in March, with rural consumers witnessing a sharper uptick of 8.75% in food prices. The gap between urban and rural consumers’ inflation experience remained sharp for the second successive month with rural households seeing a 5.43% rise in prices, while the overall inflation rate faced by urban consumers remained virtually unchanged from 4.14% in March to 4.11% in April.

On a month-on-month basis, price levels rose about 0.5%, with urban consumers facing a sharper uptick in overall prices as well as food items. Food prices rose 1.03% from March levels in urban India, while the rise was more subdued for their rural counterparts at 0.59%. The Consumer Price Index (CPI) was up 0.6% over March for urban households, while it was 0.37% higher for rural India.

The Reserve Bank of India (RBI) expects retail inflation to ease to an average of 4.5% this year from the 5.4% clocked in 2023-24, with the ongoing April to June quarter expected to see an average inflation of 4.9%. With April reporting a marginally lower inflation rate than the RBI’s projected average for the quarter, there could see some hardening in prices over this month and June.

The government has tasked the Reserve Bank to ensure inflation remains at 4%, with a margin of 2% on either side.

Ease in inflation helped by sharp drop in fuel and light prices

Within the food basket, vegetables’ inflation cooled marginally from 28.3% in March to 27.8%, staying in double digits for the fifth consecutive month. Pulses also reported double-digit inflation for the 11th straight month, at 16.84% in April, marginally lower than the 17.7% uptick in March.

However, inflation in cereals rose to 8.63% from 8.4% in March, while meat and fish prices hardened by 8.2% compared with 6.4% a month earlier. Fruits also reported higher price rise at 5.22%, from 3.1% in March. Egg prices were up 7.1%, lower than the 10.33% rise recorded in March.

Sugar and spices provided some succour to households’ food budgets, with the pace of price rise in the former easing below 6% in April from 7.2% in March, and spices inflation easing to 7.75% after a 22-month streak of over 10% inflation. Milk inflation also moderated to just under 3% from 3.4% in March.

The fractional easing in the headline inflation rate in April, despite the uptick in food price rise, was facilitated by a sharper drop in fuel and light prices, which were down 4.2% compared with a 3.2% decline in March, and aided by mildly lower inflation in some other items. These include clothing and footwear, pan, tobacco and intoxicants, housing, health, recreation and amusement.

The inflation in education as well as the transport and communication segments eased by about 0.5 percentage points each to 4.2% and 1.1%, respectively. However, prices for personal care and effects surged 7.5% in April, hardening from just over 6% in March. On a sequential basis, these items’ prices rose 3%.

Benign base effects from last year and this month’s above-normal temperatures and heatwave conditions could exacerbate food and beverages inflation further, which might push up the headline consumer inflation rate to a five-month high of 5.1%-5.2% in May, reckoned Aditi Nayar, chief economist at rating firm ICRA.

Among the major States, Odisha (7.05%), Assam (6.08%) and Haryana (6.06%), reported the highest inflation in April, while nine other States experienced a price rise of over 5%, including Bihar, Uttar Pradesh, Telangana, Madhya Pradesh, Karnataka and Rajasthan. In all, inflation was higher than the national average in 14 of 22 major States for which the National Statistical Office calculates inflation rates, including Gujarat (4.94%) and Kerala (4.84%).

On the other hand, consumers faced the lowest price rise in Delhi (2.29%), followed by Uttarakhand (3.58%), Maharashtra (3.66%), and West Bengal (3.68%).

A similar easing was recorded in pulses, whose prices rose 17.7% in March, 2024, from 18.5% in February.
| Photo Credit: Sushil Kumar Verma

India’s retail inflation moderated to a ten-month low of 4.85% in March from 5.1% in February, but food inflation remained sticky at 8.52%, little changed from the 8.66% recorded in the previous month as price rise accelerated in cereals and meat, while vegetables, pulses, spices and eggs remained in double-digit inflation.

While inflation for urban consumers cooled significantly from 4.8% in February to 4.14% in March, rural consumers had it harder as they experienced a slightly higher inflation of 5.45% in March compared with 5.34% in the previous month.

This trend was visible in the extent of food price rise as well, as it accelerated from 8.3% in February to 8.6% in March for rural India, while the food inflation for urban consumers dropped from 9.2% in February to 8.35% last month.

On a month-on-month basis, there was no change in the Consumer Price Index but the food price index inched up about 0.2% and economists reckoned that the ongoing heat wave could spike food inflation in coming months. Even as crude oil prices are firming up and an inflation spike in the US may delay hopes of interest rate cuts from the Federal Reserve, sticky food inflation at home could further dampen prospects of rate cuts from India’s central bank.

While March’s inflation rate is still aloof from the bank’s stated 4% target, average retail price rise in the last quarter of 2023-24 has been 5.01%, in line with the 5% average projected by the Reserve Bank of India (RBI).

The RBI, which last week called Inflation the elephant in the room that needs to return to the forest for good, expects retail inflation to ease to an average 4.5% this year from the 5.4% clocked in 2023-24. The ongoing April to June quarter is, however, expected to see an average inflation of 4.9%, as per the RBI.

Within the food basket, vegetables’ inflation cooled marginally from the seven-month high of 30.25% in February to 28.3% last month. A similar easing was recorded in pulses, whose prices rose 17.7% in March from 18.5% in February, eggs (up 10.33% from 10.7%), sugar (up 7.25% compared with 7.5% in February.

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However, the price rise in cereals spiked to 8.4% in March from 7.6% in the previous month, and rose to 6.4% for meat and fish, from 5.2% a month earlier. Spices inflation remained over double digits at 11.4%, moderating from 13.5% in February.

Food prices continue to be under pressure with cereals, vegetables, spices and pulses seeing high inflation and the present heat wave poses an upside risk,” said Bank of Baroda economist Madan Sabnavis, who added that recent price hikes by fast moving consumer goods firms is another monitorable.

Although inflation in household goods and services, as well as health and education, eased slightly from February levels, personal care and effects prices surged at a faster pace of over 6% in March from 5.2% the previous month.

“While core inflation continues to moderate, we remain wary of the heatwaves going ahead which could keep food inflation elevated and volatile in the summer months,” said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank. Ms. Bhardwaj expects any possible interest rate cuts only in the latter half of this fiscal year, depending on monsoons’ performance, the trajectory of crude oil prices and the timing of the US Fed’s rate easing cycle.

Rating agency ICRA expects food and beverages inflation, which was 7.8% in March, to persist over 7% in April as well. “An intensification of the impending heatwave may worsen the seasonal uptick in prices of perishables, heightening the criticality of a favourable monsoon this year to keep food inflation in check and anchor inflationary expectations,” its chief economist Aditi Nayar stressed.