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BENGALURU  - India's annual retail inflation accelerated to 7.79% in April from a year ago, remaining above the tolerance limit of the central bank for a fourth month in a row, government data released on Thursday showed.

Analysts in a Reuters poll had predicted annual inflation to touch 7.50%, higher than the upper limit of the Reserve Bank of India's 2% to 6% target, and above 6.95% in March.

COMMENTARY

UPASNA BHARDWAJ, SENIOR ECONOMIST - KOTAK MAHINDRA BANK

"The inflation readings came in line with our expectations at elevated levels. While we expect April 2022 to have likely marked the peak for headline CPI inflation, the trajectory will witness a very slow descent, with all CY2022 readings likely to remain above 6%."

"This will intensify the pressure on the MPC to aggressively frontload policy rate hikes especially with no near-term respite seen on the supply side and geopolitical tensions. We expect another 90-110 basis point (bp) repo rate hike in CY2022, with 35-40 bps in June. We also expect additional 50 bp CRR hike in order to quickly streamline the monetary policy and liquidity stance."

SUVODEEP RAKSHIT, SENIOR ECONOMIST, KOTAK INSTITUTIONAL EQUITIES, MUMBAI

"The April CPI inflation print of 7.79% is in line with our estimate of 7.78%. The increase in a sequential basis as expected was led by food (mainly cereals, edible oils, fruits, and spices), fuel products, and components of household related goods and services."

"Rural inflation continued to outpace urban inflation for the fourth consecutive month and will add to the concerns on rural demand. Core inflation continues to increase and the April print around 7.3% will be a concern for policy formulation. April headline inflation print is likely to be the peak for the year. However, we do not expect inflation to go below 6% for the rest of the year with prints over next few months remaining around 7%-7.5%."

"Over the next few months, we should be focusing on movement in edible oils, crude prices and fuel price hikes, kharif MSP announcement, and pass-through of input prices by the companies to glean on the inflation trajectory."

"On the monetary policy front, we expect the RBI (Reserve Bank of India) to hike repo rate by 35-40 bps along with 50 bps hike in CRR. In CY2022, from hereon, we expect repo rate hikes of 90-110 bps along with 50 bps of CRR hike. The RBI would aim to reduce liquidity along with reverting to above 5.15% level of repo rate as soon as possible ."

ADITI NAYAR, CHIEF ECONOMIST, ICRA, GURUGRAM

"The surge in the CPI inflation has clearly justified the off-cycle rate hike last week, and significantly raised the likelihood of a back-to-back rate increase in June 2022."

"We see a higher base softening the May 2022 CPI inflation print, although it will remain above 6.5%."

"We now foresee a high likelihood that the MPC will raise the repo rate by 40 bps and 35 bps, respectively, over the next two policies to 5.15%, followed by a pause to assess the impact of growth. As of now, we continue to see the terminal rate at 5.5% by the middle of 2023."

PRITHVIRAJ SRINIVAS, CHIEF ECONOMIST, AXIS CAPITAL, MUMBAI

"April CPI inflation came a notch above expectations due to headline items such as food, cooking gas and petrol. Within food it is primarily vegetables and cereals. Inflation also picked-up in most core CPI components, particularly clothing, footwear and household goods & services."

"This is the highest CPI print since May 2014 (8.3%) nearly eight years ago. Faster withdrawal of monetary accommodation is called for and justified. The RBIs off-cycle rate hike last week was prescient."

SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM

"Today's inflation print was higher than expected and clearly justifies the out of cycle rate hike by the RBI last week. The increase was broad based across food, fuel and core inflation. We could see higher prints of close to 8% by September due to a base effect which is likely to be the peak for inflation."

"Overall, inflation readings are expected to remain above 7% over the course of the next 6-7 months. The RBI is likely to respond with a rate hike at the June meeting by 25-35 bps and follow it up with further rate hikes taking the repo rate to pre-pandemic levels of 5.15%."

KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU

"A headline inflation print of a whopping 7.8% YoY for April (higher than the highest forecast by analysts polled) could be the peak of the current inflation cycle but prices are expected to stay elevated for months to come, likely prompting further upward revision in RBI's inflation forecast for FY23."

"It is all the more so as pass through of surging input costs to output prices remain inadequate and it still has longer runway to cover especially as demand is expected to recover, albeit at a much weaker pace."

"It is now imperative for the RBI to engineer a growth slowdown to contain inflation and prevent deeper scarring of the economy as inflation shoots through the roof. And, with the core inflation likely at 6.8%, we expect RBI to up the repo rate by between 25-50bps during its next meeting in June."