May 12, 2016
Economics
Inflation: April 2016
India’s retail inflation picked up in April’16, reversing the last months decline to 6 month lows. CPI
growth in April’16 at 5.39% came in significantly higher than market expectations and CARE’s own
estimate of 5%.
The increase in price levels during the month was chiefly accounted for by the rise in food inflation. Food
inflation rose to a 3 month high while the other heads of inflation have been either stable or have seen a
moderation in price increases. Notable has been the increase in sugar prices and the sustained high
prices of pulses.
Growth in CPI (%)
Wt
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
45.86
2.92
4.29
5.34
6.08
6.31
6.66
5.52
5.27
6.21
Cereals and products
9.67
1.22
1.38
1.46
1.7
2.28`
2.19
2.18
2.43
2.43
Food & beverages
Pulses and products
2.38
25.76
29.76
42.38
46.08
45.83
43.32
38.46
34.15
34.13
Milk and milk products
6.61
5.33
5.05
4.79
4.03
3.94
3.92
3.66
3.33
3.32
Fruits
2.89
0.92
0.86
2.06
1.99
0.72
-0.4
-0.72
-1.1
1.66
Vegetables
6.04
-6.3
0.06
2.3
3.94
4.41
6.39
0.70
0.54
4.82
Sugar and Confectionary
1.36
-13.23
-12.91
-10.48
-8.62
-6.06
-1.62
0.51
3.92
11.18
Oils and fats
3.56
3.15
3.71
5
6.59
7.16
6.45
5.22
4.85
5.04
2.38
9.42
9.27
9.41
9.42
9.35
9.03
8.55
8.51
7.96
6.53
5.85
5.91
5.62
5.76
5.74
5.71
5.6
5.5
5.56
10.07
4.68
4.74
4.88
4.95
5.06
5.2
5.33
5.31
5.37
6.84
5.79
5.34
5.32
5.28
5.45
5.32
4.59
3.38
3.03
28.32
3.08
3.34
3.51
3.78
3.95
3.95
4.38
4.01
4.34
100
3.74
4.41
5
5.41
5.61
5.69
5.26
4.83
5.39
Pan, tobacco and
intoxicants
Clothing and footwear
Housing
Fuel and light
Miscellaneous
General Index
Source: MOSPI




Food and beverage index rose to a high 6.21% (yoy), the highest level since Jan’16.
Prices of pulses continue to stay at high levels – 34% increase in April’16 (yoy).
Prices of sugar have surged on account of supply shortfalls owing to the drought in the major
sugar producing state such as Maharashtra and Uttar Pradesh.
Vegetable prices rose by nearly 5% and Fruits rose by 2%, reversing the lower prices increase
of the previous 2-3 months. This increase too can be attributed to unfavorable weather
conditions.
1
Economics

In the non-food category, the clothing & footwear index has been stable , while housing has
seen a marginal increase. Fuel inflation has declined further despite the increase in global
energy prices.
CARE’s View
With forecast of normal monsoons this season, the prospects of higher kharif crop output appear
brighter. Improved agricultural production would in turn lead to a moderation in price levels of food
products. Food prices could see a softening in coming months, albeit at a gradual pace, in step with the
monsoon conditions and kharif output. In term of price increases, fuel and energy products could witness
an increase given the recent increases in global oil prices. Given that the likelihood of significant spike in
global oil prices remains low given the supply glut, domestic retail inflation for the near term is likely to be
largely stable with increases in fuel prices to be offset by the softening food prices. The RBI will maintain
status-quo on policy rates in its upcoming monetary policy meet (7 June’16).
Contact:
Madan Sabnavis
Chief Economist
madan.sabnavis@careratings.com
91-022-67543489
Kavita Chacko
Economist
kavita.chacko@careratings.com
91-022-6754 3687
Disclaimer
This report is preparedby Credit Analysis &Research Limited (CARE Ratings). CARE Ratings has taken utmost care to ensure accuracy and objectivity
while developing this report based on information available in public domain. However, neither the accuracy nor completeness of information
contained in this report is guaranteed. CARE Ratings is not responsible for any errors or omissions in analysis/inferences/views or for results
obtained from the use of information contained in this report and especially states that CARE Ratings has no financial liability whatsoever to the
user of this report.
Inflation: February 2016
2