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Apr-24 CPI Inflation: Resistance to further lower levels

14 May 2024



  1. India’s CPI inflation remained virtually unchanged in Apr-24, with headline print coming at 4.83% YoY vs. 4.85% in Mar-24, reflecting the increased difficulty of bringing down the print towards 4.0%. In contrast, the WPI inflation rose sharply to 1.26% YoY in Apr-24 from 0.53% in Mar-24.
  2. The consolidated fuel inflation within CPI has been in negative territory for last 8-months largely supported by the increased fuel subsidies. 
  3. While Core CPI inflation continues to hover close to its record low levels, CPI food inflation has remained sticky above 8% levels for last 6-months. 
  4. India’s headline inflation dynamics continue to offer a sense of comfort with CPI remaining within the target band and gravitating towards the target albeit with much slower speed, while WPI inflation continues to remain benign.
  5. However, there are areas of discomfort arising from the stickiness in food inflation, recent rise in international crude oil prices, and geopolitical disruptions resulting in escalation in trade costs.
  6. This could get offset by a potentially lower impact from the ongoing heatwaves along with expectation of a surplus rainfall in the upcoming south-west monsoon season.
  7. While we expect that the recent fuel price cuts along with expectation of weather-related respite on food prices would help CPI inflation gravitate closer to 4.5% in FY25 from 5.4% in FY24, there are surely upside risks. WPI inflation is likely to climb towards 3.0% levels in FY25 from a deflationary -0.7% in FY24.

India’s CPI inflation remained steady and virtually unchanged in Apr-24, with headline print coming at 4.83% YoY vs. 4.85% in Mar-24. This is in line with market consensus expectation of approximately 4.8%. In contrast, the WPI inflation rose sharply to 1.26% YoY in Apr-24 from 0.53% in Mar-24. 

Key highlights 

  • On sequential basis, CPI rose by 0.48% MoM. This is slightly lower than the series median sequential increase of 0.64% in the index associated with the month of April. 
  • Annualized food inflation has remained sticky at above 8.0% levels for the last 6-months and stood higher at 8.7% in Apr-24. For the month of Apr-24, build-up in price pressures was observed in the case of Fruits, Meat & fish, and to some extent Vegetables. This was partially compensated by a sequential drop in prices of Eggs, Spices, Pulses, Sugar & confectionary items, and Cereals. 
  • Fruits saw a sharp MoM climb by 6.2%, the highest among the food categories. Vegetables rose by 1.3% MoM, reflecting the reduced availability during the intense summer months. While cereal prices have remained under control, prices of pulses have risen by 0.6% after seeing a sequential contraction for the previous 3 months. The other impact of summer has been on meat and fish prices which rose by 2.4% MoM. 
  • Consolidated fuel inflation remained in negative territory for the eighth consecutive month, with Apr-24 print coming at a 55-month low of -3.8% YoY vs. -2.8% in Mar-24. This reflects the spillover residual impact of fuel price cuts announced by the government on Mar 15, 2024 (LPG by Rs 100 per cylinder and Petrol and Diesel by Rs 2 per litre each). The deflation in fuel inflation has been a key factor behind the current moderation in the headline print.  
  • Core CPI inflation (captured by CPI ex indices of Food & Beverages, Fuel & Light, and petrol and diesel items within Miscellaneous basket) has been steady at its record low level and below 3.5% YoY for last three consecutive months. While annualized core inflation continued to stay sedate, Apr-24 saw a strong sequential momentum, with Core CPI rising by 0.60% MoM on the back of buildup in price pressure in the subindices of Housing, Personal care & effects, and Pan, tobacco & intoxicants. 
  • On the wholesale inflation front, there has been a broad-based sequential build-up in price pressure in case of food, fuel, and core items in last 2-months. This may pose upside risks for headline retail inflation if the rise is rapid enough. 

Outlook on inflation

India’s headline inflation dynamics continue to offer a sense of comfort with CPI remaining within the target band and gravitating towards the target (albeit with much slower speed), while WPI inflation continues to remain benign. Having said, there are areas of discomfort:

  • Over the last 10-months, average food inflation within CPI has been close to 8% levels. The elevated level of food inflation runs the risk of providing stickiness to headline CPI inflation and prevent a faster alignment with the 4% target.
  • Although the current level of WPI inflation is benign, the headline print in Apr-24 came at a 13-month high, suggesting a decisive turnaround in trajectory. Buildup of incipient price pressures could potentially lead to faster acceleration in headline WPI inflation in the coming months.
  • International commodity prices have come under some pressure in recent months on account of resilience in global demand and surge in geopolitical risk premium. With WPI heavy on tradables, the pass-through of higher commodity prices has started to reflect in recent data. In case of CPI, which is dominated by non-tradables, the pass-through will be slower in comparison (although gold, silver, and ornaments with the Miscellaneous basket has already started reflecting global price pressures).
  • The ongoing disruptions to maritime trade routes in the Middle East region are expected to lead to cost escalations, which could reflect in core inflation with a lag. 

On the other hand, there are few risk mitigants which could play out in the near-term:

  • The anticipated threat from a severe heatwave has so far not impacted staple vegetable items like tomatoes, onion, and potatoes in a major way although the annualized vegetable inflation continues to remain high. High frequency mandi price data suggests sequential jump in prices by 7.8% MoM for potatoes and 0.4% MoM for tomatoes in the month of May-24 so far. Onion prices in contrast have seen a 0.7% MoM fall in May-24 so far.
  • IMD’s preliminary estimate points towards the likelihood of surplus rainfall in the upcoming south-west monsoon season. If this gets accompanied by a favorable geographical and intertemporal distribution, then one could expect its salubrious impact on food inflation.

Overall, we expect headline CPI inflation to crawl towards 4.5% in FY25 if food inflation doesn’t aggravate further. But there are material risks of reversal on the way. WPI inflation is likely to climb towards 3.0% levels in FY25 from -0.7% in FY24.

Says Suman Chowdhury, Chief Economist and Head – Research, “CPI inflation for Apr-24 remained largely unchanged at 4.8%, highlighting the resistance it faces in reaching near the RBI MPC target of 4.0%. Sequentially, the headline inflation print rose by 0.48% largely and expectedly driven by food inflation in the summer season. Nevertheless, the comfort emerges from the Core CPI inflation (excluding all food and fuel components) which remained virtually stagnant at 3.4% in Apr-24.

The annualized food inflation moved further northward to 8.7% in Apr-24 with a sequential rise of 0.7%.

Wholesale inflation (WPI) in India is finally showing signs of a pickup, rising to 1.26% YoY in Apr-24, the highest print in the last 13 months after a deflationary period.

With a rising outlook for fuel and power as well as manufacturing inflation in the near term, WPI inflation is set to test higher levels in the current year. This can make it somewhat difficult for headline CPI inflation to moderate towards 4.5% in FY25, thereby making it also difficult for RBI to take a call on rate cut in the first half of the year.”

 Table 1: Overview of key sub-components of inflation


1) CPI-Consolidated Fuel index includes Fuel & Light and Petrol & Diesel indices from the Miscellaneous basket

2) CPI-Core excludes Food & Beverages and Consolidated Fuel indices from Headline CPI

Chart 1: While CPI moderated in recent months, WPI inflation has started to inch up


Chart 1: Strong likelihood of above normal/ excess/ normal rainfall in monsoon