New Delhi, May 12 (UNI): India’s retail inflation measured by consumer price index (CPI) jumped nearly 8-year high of 7.79% in April, 2022 largely driven by high food and fuel prices, according to data released by National Statistical Office (NSO) on Thursday.
Remaining firm, CPI-based inflation had stood at 6.95% in March, 2022. In April 2021, the inflation was 4.23%. The retail inflation has stayed above Reserve Bank of India (RBI)’s upper tolerance level for four months in a row making a case for increase in policy repo rates in coming Monetary Policy Committee (MPC) meeting scheduled in June.
In the wake of mounting inflationary pressure, the RBI earlier this month raised repo rate by 40 basis points to 4.40%. The central bank also increased cash reserve ratio (CRR) by 50 basis points (bps). While increase in repo rate would make loans costlier, a hike in CRR would suck some liquidity from the banking system.
The decisions were taken in an off-cycle MPC meeting reflecting the urgency to contain price rise. The RBI is tasked to keep price rise in check and maintain retail inflation between 2% and 6%. Commenting on the April inflation number, ICRA Chief Economist Aditi Nayar said that the surge in the CPI inflation has clearly justified the off cycle rate hike last week, and significantly raised the likelihood of a back-to-back rate increase in June 2022.
“We now foresee a high likelihood that the MPC will raise the repo rate by 40 bps and 35 bps, respectively, over the next two policies to 5.15%, followed by a pause to assess the impact of growth. As of now, we continue to see the terminal rate at 5.5% by the middle of 2023,” Nayar said.
The jump in food inflation in April is on expected lines with prices of vegetables, fruits, cereals, edible oil, auto fuels, clothing and footwear remaining elevated. The NSO data showed food inflation in April stood higher at 8.38% compared to 7.68% in March.
