India: Inflation increases less than expected in April
Latest reading: Consumer prices increased 3.5% in annual terms in April, following a 3.4% increase in the prior month. April’s reading was the highest in 13 months, but was notably below market expectations and still below the Reserve Bank of India’s 4.0% target as government measures shielded consumers from the impact of the Iran war.
Relative to the prior month’s data, there were higher price pressures for food and non-alcoholic beverages (+4.0% in annual terms vs +3.7% in March) and transportation (+4.0% vs +3.7% in March).
Lastly, consumer prices were up 0.27% in April on a month-on-month basis, following a 0.26% increase in the prior month.
Panelist insight: Nomura’s Aurodeep Nandi and Sonal Varma commented:
“The government has allowed oil marketing companies (OMCs) to raise petrol/diesel by INR3/ltr (~3%), which marks the first hike in ~4 years […]. The inflation impact is modest for now, but risks are building: The current hike adds ~15-20bp to headline CPI and is unlikely to move the needle much on our baseline forecast of 5.0% for FY27 inflation, which was tracking at ~4.7% (prior to the fuel price hike). However, further calibrated hikes could add to inflationary pressures and weigh on growth.”