April likely saw a decline in inflation in India, according to a Reuters survey.

Summary:

In April, India's consumer price inflation is projected to decrease to 4.80%, primarily due to ongoing challenges with food inflation. Economists anticipate inflation to hover around 5% or above in the upcoming months, with expectations for the Reserve Bank of India (RBI) to reduce interest rates in the next quarter.

Economists surveyed by Reuters suggest that India's consumer price inflation probably eased to 4.80% in April, slightly below March's figure, with food inflation persisting as a challenge.

Although headline inflation has shown signs of moderation in recent months, food prices, constituting nearly half of the consumer price index (CPI) basket, have remained high, putting pressure on household budgets. The ongoing heatwave in certain regions of the country further exacerbates the risk to India's inflation path, as highlighted in the latest bulletin from the Reserve Bank of India.

According to a Reuters poll conducted from May 3-8 involving 44 economists, consumer price inflation in April is estimated to have declined to 4.80% from 4.85% in March. Projections varied between 4.50% and 5.10%, with one-third of respondents anticipating inflation to exceed the March figure.

Suman Chowdhury, the chief economist at Acuite Ratings, remarked, "Food inflation remains persistent, hovering around 8%. It's challenging for food inflation to decline further, indicating that headline inflation won't decrease rapidly." He added, "Currently, there are no new factors to drive inflation lower. We anticipate inflation to stay around 5% or possibly increase in the coming months."

On Wednesday, V. Anantha Nageswaran, the government's chief economic adviser, stated that the Indian economy is now in a better position to pursue growth without fueling inflation.

According to a separate Reuters survey, inflation is anticipated to revert to the Reserve Bank of India's medium-term target of 4% in the next quarter. This aligns with expectations for the central bank to implement an interest rate cut during the same period.

Nonetheless, India's strong economic growth rate, standing at 8.4% in the October-December quarter, coupled with the anticipation of the U.S. Federal Reserve postponing its first rate cut, are factors likely to prompt the Reserve Bank of India to delay monetary policy easing. "We believe that monetary policy exerts minimal influence on inflation, particularly when supply constraints are the main drivers of food inflation," remarked Kunal Kundu, India economist at Societe Generale.

"Considering India's unusually high growth and the central bank's emphasis on headline inflation... we anticipate the bank to initiate its first rate cut in Q4 2024, though the possibility of delaying this decision further into 2025 cannot be dismissed."

In April, core inflation, which excludes volatile food and energy prices, was projected to be at 3.18% according to the median forecast of 22 economists. However, official core inflation figures are not released.

About RR Finance:

An integrated financial services group, offering a wide range of financial products and services to corporates, institutions, high-net-worth individuals, and retail investors.

Explore a wide range of investment opportunities with RR Finance: https://www.rrfinance.com/

Disclaimer: The content of this article is for informational purposes only and does not constitute financial advice.