India’s retail inflation edged up to 3.48 per cent in April as food prices accelerated, restaurant costs increased and economists flagged rising risks from crude oil, geopolitics and weak monsoon forecasts
India’s retail inflation rose to a four-month high of 3.48 per cent in April from 3.40 per cent in March, as food prices gathered momentum and edged closer to the Reserve Bank of India’s medium-term target of 4 per cent, according to data released by the Ministry of Statistics and Programme Implementation on Tuesday.
Food inflation accelerated to 4.20 per cent in April compared with 3.87 per cent in March, marking the highest level in four months. Rural food inflation was recorded at 4.26 per cent, marginally higher than the 4.10 per cent seen in urban centres.
“After 74 days of the West Asia conflict, the upside risks to consumer price index (CPI)-based inflation seem to be materialising at a snail’s pace. That indicates the consumer remains largely protected so far…We expect CPI inflation to average 5.1 per cent in fiscal 2027, higher than the 2.0% in fiscal 2026 with risks tilted to the upside,” said Dharmakirti Joshi, Chief Economist Crisil.
“The April inflation reading came in softer than expectations. However, the outlook remains clouded with upside risks amid supply side disruptions from geopolitics and El Nino. We expect RBI to remain on a wait and watch mode for now to assess the pass through of the risks. However, the risks for early rate hikes (probably from October onwards) are building up,” said Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.
Additionally, Consumer Price Index (CPI)-based inflation stood 3.16 per cent in urban regions, while it was 3.74 per cent for rural area, indicating relatively higher price pressures in the countryside.
“One area that did witness a notable increase was restaurant menu inflation, which rose from 2.89 per cent in March to 4.21 per cent in April. This indicates that higher LPG and fuel costs are gradually being passed on to end consumers,” said Debopam Chaudhuri, Chief Economist, Piramal Finance.
Food, Personal Care Segments See Higher Pressure
Inflationary trends remained pronounced in food-related and discretionary spending categories. Inflation in the food and beverages segment stood at 4.01 per cent during April, while restaurants and accommodation services registered inflation of 4.2 per cent.
The sharpest rise among major categories was recorded in personal care, social protection, and miscellaneous goods and services, where inflation surged 17.66 per cent, driven largely by rising prices of precious metals and jewellery.
Silver jewellery prices soared 144.3 per cent year-on-year in April, marking the steepest increase among tracked commodities. Inflation in gold, diamond and platinum jewellery remained elevated at 40.7 per cent, mirroring global commodity price trends.
Among food items, tomato prices climbed 35.3 per cent annually, while coconut (copra) prices rose 44.6 per cent during the month.
Vegetable Prices Provide Some Relief
A decline in several essential vegetables helped cushion overall inflation despite persistent pressure from other food items. Potato prices continued to remain in deep deflation territory, falling 23.69 per cent year-on-year, while onion prices dropped 17.67 per cent. Prices of peas and chickpeas also remained subdued, helping offset broader food inflation.
Several non-food categories, including vehicles and household appliances, also continued to witness negative inflation, contributing to softer overall price growth.
However, some vegetables remained expensive, with cauliflower inflation standing at 25.58 per cent on an annual basis.
‘If retail fuel prices are revised upward in the coming months, the inflation trajectory could change meaningfully. The second-order effects of higher transport and logistics costs tend to transmit rapidly across a broad section of the inflation basket”, said Chaudhuri.
Housing, Transport Remain Stable
Core sectors such as housing and transport remained relatively stable during April. Housing inflation was recorded at 2.15 per cent, while transport inflation stayed largely flat.
“With categories such as housing (2.15 per cent), health (1.64 per cent), household goods (1.61 per cent), and several non-food categories showing moderate price momentum. Yet this softness may prove fragile if higher logistics and input costs, already visible in freight and fertiliser markets, spill over into non-food segments,” Rajeev Sharan, Head of Research, Brickwork Ratings.
The data suggests that while food items and select discretionary categories are contributing to volatility, broader inflationary pressures across the economy remain contained.
Geopolitical Tensions, Weather Risks Cloud Outlook
Economists warned that the current phase of moderate inflation could face renewed pressure from geopolitical tensions and adverse weather conditions in the coming months.
Concerns have intensified after the India Meteorological Department projected below-normal monsoon conditions, raising fears that a possible Super El Niño event could affect agricultural output and tighten food supplies.
‘April CPI inflation at 3.48 per cent is broadly benign, but the rise in food inflation to 4.20 per cent shows how weather-linked pressures continue to shape the inflation path. With the monsoon forecast still uncertain, the outlook hinges on whether early rains stabilise vegetable and cereal supplies or amplify existing stresses in perishables,” said Sharan of Brickwork Ratings.
Rising global energy prices also remain a key risk factor. India’s crude oil basket averaged nearly USD 105 per barrel in May after touching USD 114 per barrel in April, significantly above the estimated FY26 average of around USD 77 per barrel.
Despite elevated global crude prices, the government has so far refrained from passing on the higher fuel costs to consumers.
“In India, recently, a deviation between food and non-food inflation trends continues to impact the inflation outlook. Volatility in agricultural commodities, baring seasonal commodities, and precious metals may continue to influence household inflation expectations in the near term,” said Ranjeet Mehta, SG and CEO, PHDCCI.
“Overall, inflation is within a manageable range, but the monsoon will determine whether India sustains this benign core trend or faces renewed, broad-based price pressures,” said Sharan.
Southern States Record Higher Inflation
Among major states, Telangana recorded the highest inflation at 5.81 per cent, followed by Andhra Pradesh at 4.2 per cent, Tamil Nadu at 4.18 per cent and Karnataka at 4 per cent.
The variation highlights regional differences in price trends, particularly in food and services categories.
‘It appears unlikely that the overall cost of funds will ease materially anytime soon. While retail borrowing rates linked directly to the repo rate may remain relatively stable in the near term, corporate borrowing costs are already witnessing a steady uptick. Bank MCLRs have started hardening since last month, and given that a large proportion of corporate loans are benchmarked to MCLRs, borrowing costs for businesses are likely to remain under upward pressure,” said Chaudhuri.
Even with emerging risks, retail inflation remains within the RBI’s tolerance band of 2–6 per cent and below its 4 per cent target, giving policymakers room to assess whether higher oil prices and weather-related disruptions spill over into broader inflation trends.
