Retail inflation moves to 7.79% near to 8-year high in April

Retail inflation based on the Consumer Price Index (CPI) increased to near 8­-year high in April to 7.79%. The previous high was noted in May 2014, when retail inflation rate touched 8.33%. The continuous fuel price hike likely had a climbing effect on the final price of various products. Also, increasing global prices of commodities impacted in price. April witnessed double ­digit inflation in edible oil, vegetable, spices, footwear and fuel and light.

The trends in inflation rate, the RBI may consider lifting the policy rate additionally by 50 bps or more in one or two steps. Experts say with the current move, another round of policy interest rate hike by the Monetary Policy Committee (MPC) is certain which, in turn, will additional push EMI on loans such as housing.

As retail food inflation increased second straight month in April at 8.1%, a batch of items like tomato, brinjal, potato, chicken and wheat saw the sharp price increases. Inflation in prices of chicken increased by 13.77% in April 2022, while the overall food inflation in the meat and fish category was 6.97%.

Industrial growth based on the Index of Industrial Production (IIP) grew 1.9% in March though on a high base. The output of manufacturing, the biggest component of IIP, grew at 0.9% and mining and electricity at 4% and 6.1%, respectively. The geopolitical situation is unlikely to get better in the near term in view of the Russia­-Ukraine issue, Ind­Ra believes the ongoing industrial recovery will continue to face headwinds and will require more policy support, said, Sunil Kumar Sinha and Paras Jasrai of India Ratings & Research.

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