India's Retail Inflation Down To 4.9% YoY In April

Consumer inflation continued to remain benign with the April recording inflation of 4.9% YoY. This is lower than March's 5.3% inflation (revised upward from 5.2% reported earlier). Core inflation slightly inched up to 4%, after hitting a three year low of 3.9%. Urban inflation was down to 4.4%, while rural inflation came down to 5.4%

Consumer inflation for April down to 4.9% YoY, lower than March’s 5.3%.

Lower food inflation has led to lower headline numbers; Core inflation inches up to 4%.

Pressure on inflation emerging from possible drought, higher crude oil prices and depreciating Rupee.

High possibility of central bank leaving policy rates unchanged in June, due to upside risks to inflation.

Another risk to inflation is from the depreciation of the Rupee, which has been under pressure for the past one month, primarily due to sell-off of local equities by foreign portfolio investors. INR was trading at 61-63 to the dollar for a long time, but has hit 64/USD during the last week and continues at those levels now. With India importing ~80% of required crude oil, the weakness in INR will translate to higher fuel costs, multiplying the impact of already higher crude oil prices.