India’s CPI inflation edged up marginally to 3.48% YoY in Apr-26 from 3.40% in Mar-26 – offering a sense of deceptive comfort
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India’s CPI inflation edged up marginally to 3.48% YoY in Apr-26 from 3.40% in Mar-26 – offering a sense of deceptive comfort. Behind the benign headline print, latent inflationary pressures are steadily building. Sequential price momentum remained exceptionally subdued, aided by moderation in fuel inflation and only gradual food price firming, while core inflation stayed broadly stable. Yet, the current inflation comfort appears increasingly disconnected from underlying cost dynamics. Rising global energy prices, sharp increases in commercial LPG, ATF and freight-linked fuel costs, along with persistent INR depreciation, are beginning to feed into logistics, airfares, processed food and FMCG packaging costs, although the pass-through to consumer prices remains incomplete so far. Price of retail petrol and diesel prices remain unchanged, as Government shields consumers. Simultaneously, monsoon-related risks remain materially underpriced. A deficient monsoon sets the stage for food inflation resurgence in H2FY27 via lower crop yields and low soil moisture for the Rabi season. While buffers such as elevated cereal stocks, healthy reservoir levels and staggered fuel price adjustments may cushion the shock, risks to FY27 inflation are clearly skewed upward. We retain our FY27 CPI inflation forecast at 4.5% but attach upside risks to it. The debate around passthrough is no longer about ‘if’ but rather ‘how much’ and ‘when’ the latent cost pressures will transmit to CPI headline and core inflation.