In April 2024, India’s Consumer Price Index (CPI) inflation was largely unchanged at 4.83% YoY, compared to 4.85% in the previous month. Higher food inflation during the month was offset by the sharper deflation in fuel prices.

Food inflation remained elevated at 7.9% YoY. Vegetables, cereals, and pulses remained the major drivers of inflation. Together, they account for 18% of the weight in the CPI basket but contributed a significant 55% to headline inflation in April 2024. Food inflation also remained broad-based, with 44% of items in the food basket witnessing inflation rates surpassing 6%.

Core inflation was flat at 3.25% YoY despite a sharp increase in gold prices in April. A steady correction in a refined measure of core inflation, excluding transportation fuel and valuables like gold, reflects continued moderation in underlying inflationary pressures.

The India Meteorological Department (IMD) predicts an ‘above-normal’ monsoon season at 106% of the long-period average. The IMD anticipates El Niño transitioning to a neutral phase in the early monsoon period and La Niña developing during the latter half. A favourable monsoon season augurs well for the trajectory of food inflation.

We anticipate inflation to average around 4.3-4.5% in FY25. While food prices may contribute to volatility in headline inflation, subdued consumption is expected to keep core inflation benign.

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