India’s annual consumer inflation likely inched closer to the central bank’s 4% medium-term target in April as energy costs filtered into domestic prices, according to a poll of economists conducted May 4-8. The survey of 46 economists projected the year-on-year change in the consumer price index (CPI) at 3.80% for April, up from 3.40% in March. Individual forecasts in the poll ranged from 2.80% to 4.20%.
The CPI release is scheduled for publication on May 12. Analysts polled cited a combination of elevated global oil prices and pass-through from recent increases in household cooking fuel costs as the main reasons for the expected uptick in headline inflation.
Inflation has remained under the Reserve Bank of India’s 4% target for more than a year, a run supported by softer-than-usual food price gains and favorable base effects. Those tailwinds, however, face potential reversal as crude oil prices remain roughly 40% above pre-conflict levels, a condition economists say threatens to push retail energy costs higher in the months ahead.
"We expect April headline inflation to tick up...on higher food and some pass-through of higher global energy prices," said Rahul Bajoria, head of India and ASEAN economic research at BofA Securities. He added that increases in restaurant and accommodation services prompted by higher input costs and commercial LPG rationing could add upward pressure, though he noted a partial offset from a decline in gold prices.
Domestic firms raised prices for LPG, the household cooking fuel, in March after disruptions to energy supplies related to the U.S.-Iran conflict, and economists said that effect likely carried through into April. "The increase that we are seeing in part is happening because it is capturing the increase in LPG prices in March. The impact is flowing over to April as well... we are not seeing widespread pass-through at this point... those things happen with a lag," said Sakshi Gupta, principal economist at HDFC Bank.
India has reduced taxes on petrol and diesel to blunt the immediate impact of higher global oil costs on consumers. Still, forecasters said prolonged elevated energy prices would eventually force a rise in retail fuel rates. "I am assuming that sometime in Q2, rather sooner than later, they will have to hike retail fuel prices because neither the fiscal buffers nor (the) buffers with the OMCs (oil marketing companies) are enough to withstand a prolonged shock," said Dhiraj Nim, an economist at ANZ.
Core inflation, which strips out volatile food and fuel components, is expected to have been 3.55% in April; India does not publish an official core inflation series. The survey also indicated that wholesale price index (WPI)-based inflation likely accelerated to an annual 4.40% in April from 3.88% in March.
Monsoon prospects add another layer of uncertainty: forecasters warned that a below-normal monsoon, as signaled by the India Meteorological Department, could lift food inflation and place pressure on the Reserve Bank of India to consider policy tightening. Despite these upside risks to inflation, most economists polled last month still expected the central bank to keep interest rates on hold through 2027.
Key details:
- Poll period: May 4-8; respondents: 46 economists.
- Headline CPI projection for April: 3.80% (March: 3.40%); forecast range: 2.80% to 4.20%.
- Core inflation estimate: 3.55% (India does not publish official core CPI).
- WPI estimate for April: 4.40% (March: 3.88%).