- Wealth PMS (50L+)
While exit polls are declaring the arrival of a political party that, according to markets, will wash away all our sins by dipping the opposition candidates in the Ganga, we have some bad news on the inflation front.
Consumer Price based inflation for April just bumped up to 8.59%, making last month’s uptick a “trend” that has reversed into an upward direction. After falling from the levels of 11% in November, prices have picked up again.
As you can see, the slope of the blue line has also turned upwards, and while it’s not alarming yet, it looks like inflation is quite firmly embedded in the system.
The rural folks seem to have had much higher inflation, at 9.25%. Urban inflation also picked up to 8.46%.
Most of the CPI is food (50%) so inflation in food is important. The recent trend has been down (compared with Jan/Feb)
(Note: Each element’s size is its weight in the index)
As you can see only “household items” has gone up recently, most others have come down, in the recent past.
On a comforting note, though, inflation in non-food, non-fuel items has fallen marginally to 7.47% but is still way too high for comfort. Food, though, has gone above 9% again:
RBI has expected inflation to stay in the 8% zone in this year. In their macro statement on April 1, we have their forward estimate of inflation:
We have come in at the outer end of the April estimate. I wonder how we do going forward.
While the impact *should* be negative since it indicates a higher than expected inflation rate, we will believe that a certain Mr. Modi will fix everything, so markets will ignore this. But after this election madness is over, someone will need to figure out how to keep inflation under check.