Highest Inflation in 8 Years as Food and Oil Prices Spike

Retail inflation jumped to an eight-year high of 7.79 percent in April, up from 6.95 percent in March, fueled by high food and oil costs. This was the fastest expansion since September 2014.

The new data also showed that consumer price-based inflation (CPI) was above the Reserve Bank of India's upper tolerance limit of 4 to 6% for the fourth month in a row. In April 2021, it was 4.23 percent. In fact, since January 2022, retail inflation has been above 6%.

Food inflation, which accounts for roughly half of the CPI basket, hit a new high in April and is expected to stay high as a result of rising vegetable and cooking oil prices, as well as higher freight costs due to the high price of petroleum at the pump. In April, food inflation increased to 8.38 percent, up from 7.68 percent in March and 1.96 percent in April last year.

The Union Finance Ministry, on the other hand, was confident that the RBI and the Centre would be able to control growing inflation. The probability of sustained high inflation seemed modest because aggregate demand is gradually returning.

"While inflation is predicted to remain high in 2022-23, mitigating measures could shorten its duration. In addition, evidence on spending patterns suggests that inflation in India has a lower impact on low-income groups than on high-income ones," the monthly economic review stated.

In an off-cycle meeting on May 4, the RBI raised the repo rate by 40 basis points (bps) to 4.40 percent. In an off-cycle meeting on May 4, the RBI raised the repo rate by 40 basis points (bps) to 4.40 percent.

The government has given the Reserve Bank of India the task of ensuring that inflation stays at 4% with a 2% buffer on either side. According to government data, industrial production increased by 1.9 percent in March and by 11.3 percent in the fiscal year 2021-22.