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Informist, Tuesday, May 12, 2026

 

By Shubham Rana

 

NEW DELHI – Retail inflation in India remained steady in April, coming in lower than expected even as some passing along of energy price and supply shock was visible. However, inflation is unlikely to stay benign for long if the government raises retail prices of petrol, diesel, and cooking gas and global energy prices remain high, economists said.

 

Data released Tuesday showed CPI inflation in India rose to a 13-month high of 3.48% in April from 3.40% in March. The headline print was sharply below the economists' consensus estimate of 3.8%.

 

Inflation rose mainly because of higher prices of food and restaurant services, reflecting the impact of cooking gas shortage stemming from the war in West Asia and the increase in commercial cooking gas prices. The impact of a cooking gas shortage was also visible in kitchen appliances, with inflation in stoves, gas burners, and induction stoves rising to 2.34% in April from 0.85% a month ago.

 

Core inflation, which excludes fuel and food items, was steady at 3.4% in April, compared with 3.3% a month ago. Core inflation excluding precious metals was even more benign. "Core core CPI inflation remains low in April, indicating minimal pass-through of the energy inflation to the consumer," said Gaura Sen Gupta, chief economist at IDFC FIRST Bank.

 

"The impact of war in West Asia was the key point of interest in current month's CPI inflation," State Bank of India Group Chief Economic Adviser Soumya Kanti Ghosh said in a report. "Despite exchange rate fluctuations and external shocks like supply chain disruptions, the imported inflation has not increased but decelerated slightly to 6.34% in April as compared to 6.49% in March."

 

This broad-based comfort on inflation will last for only as long as petrol and diesel prices remain unchanged, economists said, adding that a fuel price hike could be imminent. "We expect retail fuel prices to rise in the near term, which is likely to exert upward pressure on headline CPI," Sen Gupta said. "Second round effects will follow through after retail prices increase."

 

Fears of a rise in pump prices increased after Prime Minister Narendra Modi Sunday urged people to cut down on the use of petrol and diesel. Tuesday, Petroleum Minister Hardeep Singh Puri said he is worried about how long state-owned oil companies can handle the strain. This does not, however, mean the price pressure will be passed on to consumers immediately. It is contingent on how crude oil prices move, Puri said.

 

According to economists at Barclays, it is only a matter of time before the government announces a pump price hike for petrol and diesel. "The recent speeches by PM Modi urging citizens to curb gold buying, delay foreign vacations, support locally manufactured goods, consciously choose public transport over personal vehicles and, in general, curb petrol and diesel consumption in the national interest, sets the stage for an imminent pump price hike, in our view," Barclays economists Aastha Gudwani and Amruta Ghare said in a report.

 

Barclays expects an INR 5-per-litre increase in pump prices for both petrol and diesel in May, which would push CPI inflation higher. Barclays has raised its CPI inflation forecast for the financial year 2026-27 (Apr-Mar) to 4.5% from 4.0?rlier. The Reserve Bank of India projects retail inflation at 4.6% in the current financial year. An increase in retail prices of petrol and diesel could push retail inflation closer to the upper end of the RBI's tolerance band of 2-6%.

 

Economists see CPI inflation rising to around 4% in May on the back of higher food prices, which is typical during the summer months. The impact of lower-than-normal southwest monsoon rains and higher temperatures on food prices will also determine the inflation trajectory in India, though near-term prices are seen remaining under control, they said.

 

With inflation seen to be manageable for now, unless pump prices are hiked, the RBI's Monetary Policy Committee is widely expected to hold interest rates in June. However, an increase in retail fuel prices and the consequences could prompt the committee to consider raising the policy repo rate in the near future.  End

 

Edited by Rajeev Pai

 

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