Societe Generale economist Kunal Kundu anticipates that India's headline Consumer Price Index (CPI) inflation for April will increase to 3.9% year-on-year, up from 3.4% in March, primarily due to rising costs in food-and-beverages and fuel components [1]. Kundu attributes this uptick to conflict-related energy shocks, supply-chain stress affecting vegetables and edible oils, and emerging pipeline risks from fertilisers, El Niño-linked weather patterns, and low dam storage levels [1].
The economist notes that food prices, which have a significant weight in the CPI basket, are experiencing volatility, particularly in perishables such as tomatoes and cauliflower. He warns that if both vegetable and edible oil prices continue to rise together, this could lead to a broader increase in food inflation, impacting both fresh and processed food categories [1].
While India's administered fuel pricing may initially dampen the retail impact of energy shocks, Kundu cautions that inflationary effects could still emerge over time through adjustments in LPG and household fuel prices, as well as higher freight and input costs feeding into goods and services pricing [1]. He also highlights ongoing risks from costly and limited fertiliser availability, potential monsoon failure due to a strong El Niño, and reduced water storage in major dams, all of which could shape inflation expectations in the coming months [1].
Despite the anticipated rise, the projected April CPI inflation would remain within the Reserve Bank of India's tolerance band. However, the upward trend marks the first clear pickup in inflation since March, signaling potential challenges ahead for policymakers and market participants [1].
CONCLUSION
Societe Generale's analysis points to mounting upside risks for India's inflation, driven by food, fuel, and weather-related factors. While April's CPI is expected to stay within the RBI's tolerance range, the broadening of price pressures suggests that vigilance will be required in the months ahead. Market participants should monitor evolving supply and weather risks closely.