April inflation at 7.5%

India’s inflation rate in April is being forecasted to reach 7.5% which is an 18 month high. This is the highest level the inflation has reached since October 2020. 

Although the surge in inflation is on account of rising fuel prices and rising food prices but it was not unexpected. Globally, Energy and fuel prices have been soaring up since February this year owing to Russia-Ukraine war.  Nevertheless Government of India decided to defer the fuel price hike until after March in view of the Assembly Polls in 5 states (UP, Punjab, Uttarakhand, Manipur & Goa).

A 4% drop in the Rupee this year gave a shot in the arm leading to the upward rise in local oil prices. Considering this surge in inflation RBI has shifted its focus from growth to price stability & thereby deciding to hike its repo rate by 40 basis points to 4.40%, first since 2018.