CPI Inflation Soars To 7.79%; Highest In Eight Years

Retail inflation rose to the highest since May 2014, led by a rise in prices of food items and fuel.

Consumer Price Index inflation rose to 7.79% in April 2022 compared to 6.95% in March, according to data released by the Ministry of Statistics and Programme Implementation on Thursday.

Inflation in food and beverages rose to 8.1% in April compared to 7.47% in March 2022. This is the highest since November 2020.

Core inflation, excluding food and fuel, also rose to the highest since May 2014, at 7.24% in April 2022, compared to a rise of 6.53% in March, according to Bloomberg.

A Bloomberg poll of 34 economists had estimated inflation at 7.42%.

Retail inflation has exceeded the RBI's upper target for the fourth straight month and prompted the Monetary Policy Committee to raise the repo rate by 40 basis points to 4.4% in an unscheduled meet earlier this month.

CPI inflation jumped to a 95-month high of 7.8% in April 2022, with a sharp but expected spike in food inflation pushing up the headline figure, even as core inflation printed at a rather unpleasant level, Aditi Nayar, chief economist at ICRA said. The negative surprise was largely on account of miscellaneous items, fuel and light, and clothing and footwear, raising the specter of a generalisation of inflationary pressures.

Persistent supply side disruptions due to geopolitical developments may impart stickiness to the food inflation, said Nayar, adding that early data for May 2022 indicates that prices of edible oils, atta and wheat have risen further.

Inflation is set to become broad-based this fiscal, rising across food, fuel and core inflation, stated a research note by Crisil. "We expect overall CPI inflation to rise to 6.3% in fiscal 2023 compared with 5.5% in the previous year," it said.

Inflation Internals 

With a large part of the adjustment in diesel and petrol prices accounted for in the April inflation data, the sharpest pick-up was in the fuel and light segment. Alongside, core commodities like clothing also continued to see higher inflation. Among food items, vegetables saw a spike in the inflation rate.

• Fuel and light inflation stood at 10.8% against 7.52% in March. On a month-on-month basis, it rose by 3.1%.

• Inflation in oils and fats was at 17.28% compared to 18.79% in March. On a month-on-month basis, it rose by 2.5%.

• Inflation in meat and fish was at 6.97% compared to 9.63% in March. On a month-on-month basis, it rose by 0.52%.

• Vegetable prices rose 15.41% over a year ago compared with an increase of 11.64% in the previous month. On a month-on-month basis, it fell by 0.36%.

• Pulses inflation was at 1.86% compared to 2.57% last month. On a month-on-month basis, it rose by 0.49%.

• Clothing and footwear inflation was at 9.85% compared to 9.40% a month ago. On a month-on-month basis, it rose by 0.99%.

• Housing inflation stood at 3.47% compared with 3.38% the preceding month. On a month-on-month basis, it rose by 4.54%.

While base effect had some impact on higher inflation in April 2022, the price increase was observed across all major commodity groups, said Sunil Kumar Sinha, Principal Economist at India Ratings & Research.

According to the rating agency:

• Inflation in cereals and products is at a 21-month high.

• Vegetable inflation is at a 17-month high.

• Inflation in spices is at a 17-month high.

• Consumer food price inflation at 8.38% is also a 17-month high.

"Second round impact of higher fuel prices have started reflecting on other goods and services also. Inflation for miscellaneous goods and services jumped to 115-month high to 8.03%," said Sinha. In addition, inflation in health services is turning structural, as it has remained in excess of 6% for last 16 months. Education inflation, although low, has touched a 23-month of high of 4.12% in April 2022.

The gap between rural and urban inflation remained high, with rural inflation at 8.38%, while urban inflation was at 7.09%.