India CPI inflation accelerated by more than expected to a near 8-year high of 7.79%YoY in Apr-22
Download ReportApr-22 CPI - Inflation genie firmly out
India CPI inflation accelerated by more than expected to a near 8-year high of 7.79%YoY in Apr-22, building on last month’s print of 6.95%. Apr-22 inflation captures the impact of global spill overs of Russia-Ukraine war on both food and fuel prices more emphatically, along with broad-basing of price pressures. Post the upside in Apr-22 data, we now attach an upside risk to our average CPI inflation estimate of 6.1-6.3% for FY23. We still believe that inflationary pressures could peak in H1 FY23 with average inflation being above 7.0% i.e., higher than envisaged earlier (6.6%). The second half of the fiscal year could see inflation moderating somewhat below 6.0% on average basis on account of a normal monsoon, possible government administrative measures and slowdown in growth inhibiting complete pass-through of higher input costs (besides a favourable statistical base effect). On rate action, we now expect RBI to hike repo rate by 35 bps in Jun-22, and follow up with incremental 70 bps of rate hikes over the remaining part of FY23, with bulk of this likely to be front loaded.