India’s retail inflation rate in April soared to an eight year high at 7.79% over 4.23% in the same month of the previous year, fuelled by the high prices of vegetables and oils. Industrial production meanwhile grew at 1.9% in March compared with 24.2% in March 2021.
The headline inflation growth rate is the highest in the last eight years. Even during the last two years of the pandemic, the consumer price inflation rate touched a peak rate of 7.61 in October 2021.
The price spiral is even more shocking in the food inflation category. Food inflation rate in the month of April soared to 8.38% compared with 1.96% in the same month of the previous financial year. The food price spiral in April is higher in the rural areas than the urban segment at 8.50% compared with 1.31% in the same month last year.
Core inflation for the month came in at 7%, up sequentially from 6.4% in the month of March.
It may be noted that the CPI has remained above the Reserve Bank of India’s (RBI’s) upper tolerance limit of 6% for four months now. This essentially means that the RBI’s restoration of the pre pandemic repo rate of 5.15% will be faster than expected.
It may be noted that the banking regulator has already increased the repo rate by 40 basis points in an off-cycle monetary policy committee meeting held earlier this month. The RBI has also taken liquidity withdrawal measures.