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Economy

Inflation Jumps to 5.39% in April, Core Inflation Goes Back To Dangerous Territory

Inflation-CPI-India-May-2016.png

India’s inflation for April 2016 sprung a surprise: it went up to 5.39% as a surprise. Inflation CPI India May 2016

The worry really is food inflation. Housing inflation goes up in April as most government accommodation resets happen in April. 

CPI Components

Note that transport costs are also up.

Rural inflation, being more reliant on food, is going up too:

Urban Rural Inflation

Our View: Inflation going up like this is bad. The first chart shows you an uptick in overall inflation as an index. The big deal really is in “core” inflation – when you remove food and fuel, and then compare the index month on month, you see it’s now rising suddenly and rapidly. 

Core Inflation

This is at 6.83% annualized and is more scary. Of course, April could be an anomaly – but the trend isn’t looking good. If inflation reappears, our rate cut cycle will disappear and with it, much about the economy. We have to have a revival without high inflation, and RBI is well aware of that.