CPI inflation rises to 3.48% in April on food price gains

INdia’s newspaper headline retail rising prices, as metrical by the consumer damage indicant (CPI) rose mildly to 3.48% in April, from 3.40% in March, according to data released by the National Statistics Office on Tuesday. The print was softer than the 3.8% projected earlier in a Bloomberg poll of economists and remained below the Reserve Bank of India’s 4% target.To be sure, the April print is the fourth consecutive rise in retail inflation and the highest recorded under the new CPI series with 2024 as the base year, which was released earlier this year.The relatively benign headline print comes at a time when oil prices have again become a major macroeconomic concern for India. Brent crude rose above $107 a barrel on Tuesday after hopes of a US-Iran peace deal faded, reversing some of the relief seen last week when prices had fallen to a two-week low on expectations of a possible ceasefire.“While headline CPI inflation looks benign at the moment, price pressures will be more visible once (1) pass-through from producers to consumers gathers pace, and (2) the price of petrol and diesel are revised up,” said Pranjul Bhandari, chief India economist at HSBC in a note.The April CPI print still captures only a limited pass-through from the global energy shock. Transport inflation was almost flat at -0.01%, while the broader housing, water, electricity, gas and other fuels division recorded inflation of 1.71%. This suggests that administered prices and limited pass-through by oil marketing companies have so far prevented the oil shock from showing up fully in headline retail inflation, although there has been price increases in select fuels such as premium petrol, LPG and diesel for industrial use.The uptick in April inflation was driven mainly by food prices. Inflation based on the Consumer Food Price Index rose to 4.20% in April from 3.87% in March. Food inflation, however, was not uniform across items. Tomato inflation remained high at 35.28% and cauliflower inflation stood at 25.58%. At the other end, potato prices contracted 23.69% year-on-year and onion prices fell 17.67%. The increase in food inflation should also be read with the base in mind. The food price index rose only modestly month-on-month, but annual inflation still climbed because prices were being compared with a softer base from April 2025.Rural inflation was higher than urban inflation, both for the headline index and food. Overall rural CPI inflation stood at 3.74%, compared with 3.16% in urban India. Food inflation was 4.26% in rural India and 4.10% in urban India.The sharpest inflation continued to be in precious metal-linked categories. Inflation in the personal care, social protection and miscellaneous goods and services division stood at 17.66%, the highest among major divisions. Within items, silver jewellery recorded inflation of 144.34%, while gold, diamond and platinum jewellery saw inflation of 40.72%.The twin shock of El Nino and the energy crisis could drive up inflation this fiscal year leading to rate hikes. “Our model suggests that the El Niño/temperature channel can add 0.5ppt to inflation over a year. Adding this to our estimates from the energy shock (including our assumption of a INR6-7/litre rise in petrol and diesel prices), we expect headline inflation to average 5.6% in FY27. On this basis, we expect the RBI to deliver two rate hikes, over 4Q26 and 1Q27, taking the repo rate to 5.75%,” said Bhandari.