India's retail inflation rises to 4-month high of 3.48%
What's the story
India's retail inflation hit a four-month high of 3.48% in April, up from 3.4% in March, official data showed today. The rise is mainly due to an increase in food prices, with consumer food inflation rising to 4.2% in April from March's 3.87%. This is the highest reading in four months and brings the country's inflation rate closer to the Reserve Bank of India's (RBI) medium-term target of 4%.
Economic impact
US-Iran conflict, weather disruptions could further fuel inflation
The rise in food prices comes as economists warn that the ongoing US-Iran conflict and weather-related disruptions could further fuel inflation in the coming months. The India Meteorological Department has predicted below-normal monsoon conditions, raising concerns that an El Nino event later this year could affect agricultural output and food supply. Energy prices also remain a potential source of inflation, with India's crude oil basket averaging around $105 per barrel in May after hitting $114 per barrel in April.
Inflation containment
Government's stance on global oil price increase crucial
So far, the government has refrained from passing on the increase in global oil prices to consumers, helping contain inflation. However, if fuel prices are revised upward, it could have a ripple effect on transportation costs and food prices through higher logistics and input costs. In light of the rising inflation, the RBI kept interest rates unchanged at its April 8 meeting. The central bank unanimously decided to maintain the benchmark repo rate at 5.25%, keeping a neutral policy stance.