IGI Logo

New Delhi, May 12 With retail inflation sliding to an 18-month low of 4.70 per cent in April 2023, rating agency ICRA foresees the CPI inflation to remain range-bound at 4.7-5.0 per cent in May-June 2023.

According to official data, retail inflation was lower in April compared to 5.66 per cent in March 2023, owing to fall in food prices.

Aditi Nayar, chief economist and head - research & outreach, ICRA Ltd, while commenting on consumer price index-based inflation, said: "April 2023 was marked by above-average rainfall and lower than normal temperatures, which helped to keep prices of some vegetables under check."

Notwithstanding the mixed month-on-month trends across food items, the YoY, retail food inflation is likely to remain subdued in May 2023 aided by the sustained high base (+8.0 per cent in May 2022), she noted further.

Nayar informed that: "With El Nino expected to materialise only in the second half of the monsoon season as per the IMD, kharif sowing may not be impacted. However, any subsequent deficiency in monsoon rainfall could affect kharif yields and winter sowing, and thereby food inflation, which poses a risk to the CPI inflation trajectory."

Although the impact of a favourable base effect related to escalation of geopolitical conflict is likely to have peaked in April 2023, ICRA foresees the CPI inflation to remain range-bound at 4.7-5.0 per cent in May-June 2023, she predicted.

"With a dip in the CPI inflation below 5 per cent and surprisingly subdued IIP growth, we foresee a high likelihood of a pause from the monetary policy committee of the RBI in its next meeting. However, a pivot to rate cuts appears quite distant," she explained.