India’s April CPI Inflation Seen Rising To 3.8% On Higher Fuel Costs

India’s retail inflation likely moved closer to the Reserve Bank of India’s 4% target in April as higher fuel prices and increased LPG costs pushed up consumer prices, according to a Reuters poll conducted between May 4 and May 8.

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The poll of 46 economists projected consumer price index (CPI)-based inflation at 3.8% in April compared with 3.4% in March. Estimates in the survey ranged between 2.8% and 4.2%. Official inflation data is scheduled to be released on May 12.

Higher crude oil prices following the U.S.-Iran conflict are expected to increase inflationary pressure in India, which imports more than 80% of its crude oil requirement. Brent crude prices have remained significantly above pre-conflict levels despite some moderation in recent sessions.

Fuel Costs And LPG Prices Push Inflation Higher

Economists in the Reuters survey said the increase in LPG prices during March has started reflecting in April inflation numbers. Commercial LPG prices were revised upward after supply disruptions linked to tensions in West Asia.

Rahul Bajoria, Head of India and ASEAN Economic Research at BofA Securities, told Reuters that headline inflation likely increased due to higher food prices and partial pass-through of global energy prices.

Sakshi Gupta, Principal Economist at HDFC Bank, told Reuters that the impact of LPG price increases in March has extended into April, although broader pass-through to other categories remains limited for now.

According to the poll, India’s core inflation, which excludes food and fuel prices, is estimated at 3.55% in April. India does not officially publish core inflation data.

WPI Inflation Also Expected To Rise

The Reuters survey also projected wholesale price index (WPI)-based inflation at 4.4% in April against 3.88% in March.

Economists noted that while petrol and diesel prices have remained largely stable due to government measures, elevated global crude oil prices could eventually affect domestic retail fuel prices if international rates stay high for a prolonged period.

Dhiraj Nim, Economist at ANZ, told Reuters that oil marketing companies may face pressure if crude prices remain elevated for an extended period.

Food inflation has remained relatively soft in recent months, helping overall retail inflation stay below the RBI’s medium-term target. However, economists are also tracking monsoon-related risks after the India Meteorological Department flagged the possibility of below-normal rainfall in some regions.

The RBI has maintained its inflation target at 4% with a tolerance band of 2 percentage points on either side. Recent inflation readings below the target had supported expectations of stable interest rates.