India’s wholesale inflation rose to a 13-month high of 1.26 per cent in April 2024, led by fuel, food, and core items, according to official data from the commerce ministry. Despite global headwinds, the trajectory of WPI inflation in fuel and power remained low during April, with food inflation still high. Experts predict that with the monsoon expected to be above normal, it will help ease food inflation in the coming months. Food inflation was higher due to an increase in vegetables, but with a normal monsoon forecast this year, it is likely to be lower overall. Core inflation remains subdued at around 3.25 percent, and may not have a significant impact on the RBI’s monetary policy decision.
The pressure on food prices has been interrupting the disinflation process in India, posing a challenge for lowering the inflation trajectory to the 4 percent target set by the RBI. While crude inflation has recently moderated after peaking in April, the surge in the commodity market could affect business growth and lead to further inflation. ICRA projects WPI inflation to harden further to 2.0-3.0 percent in May 2024, due to the widening of the unfavorable base for items like food and crude oil. This suggests that inflationary pressures are expected to persist in the coming months.
Sanjeev Agrawal, president of PHD Chamber of Commerce and Industry, highlighted that WPI inflation remains benign due to negative inflation in non-food articles and manufactured products. However, food inflation remains elevated at 7.74 percent in April 2024. With the expectation of a normal monsoon, food inflation is likely to decrease, thereby lowering overall inflation. Deepak Agrawal, CIO Debt at Kotak Mutual Fund, noted that core inflation numbers continue to remain subdued, and may not significantly impact the RBI’s monetary policy decision.
The industry experts have pointed out that while there has been a recent moderation in crude inflation, the surge in the commodity market could negatively impact businesses and lead to further inflation. ICRA’s projection of WPI inflation to harden further in May 2024 suggests that inflationary pressures are likely to persist in the near future. The challenge of lowering inflation to the 4 percent target set by the RBI remains, with food prices being a key factor. Overall, the economic outlook remains uncertain, with inflationary pressures expected to continue in the coming months.
