Costlier food products put pressure on retail inflation in April, despite core inflation continuing to decline and even reaching its lowest point in the current CPI series.

Consumer price index-based inflation dropped to an 11-month low of 4.83% in April, nearly equal to the 4.85% level in March, according to official data issued on Monday. With 8.7% inflation in April compared to 8.52% in March, consumer food price inflation continued to trend higher than the headline inflation figure.

The food and beverage basket saw a rise in retail inflation last month, from 7.68% in March to 7.87%. With CPI inflation in April at 27.8% vs 28.34% in March, vegetables had a little decrease in price, but fruits, grains, meat, and fish saw an increase in cost.

Retail inflation for cereals was 8.63% in April compared to 8.37% in March, while for fruits it was 5.22% in April compared to 3.07% in March. In a similar vein, CPI inflation for meat and fish in April was 8.17% as opposed to 6.36% in March. Notably, after 22 months, the rate of inflation in spices dropped to single digits in April 2024, from 7.75% in April.

Nonetheless, experts predict that food costs will continue to rise in the upcoming months due to the heat wave that is affecting several areas of the nation. "As a result of the unfavorable base (+3.3% in May 2023 vs. +4.2% in Apr 2023) and the above-average summertime temperatures and heatwave conditions, ICRA fears that the food and beverage inflation will retrace above the 8.0% mark in May 2024. This would drive the headline CPI inflation to a five-month high of 5.1-5.2% in the current month," stated Aditi Nayar, Chief Economist, Head Research and Outreach, ICRA.

There's a lot of uncertainty around the future of food prices. Madhavi Arora, Lead Economist at Emkay Global Financial Services, stated that although Rabi production has made good progress, there is still need for cautious monitoring because to the irregular seasonality of vegetable prices and the rising frequency of climatic shocks.

Although food inflation is somewhat higher at 8.7%, according to DK Srivastava, Chief Policy Advisor at EY India, the downward pressure is coming from petroleum-related commodity groupings, such as fuel and light and transport and communication services. 

He said that core inflation has also been trending lower, at 3.2%, the lowest level since the 2012 base CPI series. If this trend persists, CPI inflation in the first quarter of FY25 may come in slightly below the RBI's forecast of 4.9%. 

Nonetheless, Bank of Baroda Chief Economist Madan Sabnavis pointed out that although core inflation has been contained thus far, it might suddenly spike as a result of product price increases by businesses. This is true for the consumer products industry, where price hikes have been postponed for more than a year.