India's April Consumer Inflation Climbs to 3.8%, Driven by Rising Fuel Costs: Reuters Poll

India's Consumer Inflation Edges Closer to Central Bank Target

India's annual consumer inflation is likely to move closer to the Reserve Bank of India's 4% medium-term target in April, as higher fuel costs following the U.S.-Iran war begin to feed into prices. According to a Reuters poll of 46 economists, inflation is expected to rise to 3.80% in April from 3.40% in March.

The Reserve Bank of India has been able to keep inflation below its target for over a year, thanks to softer food prices and favorable base effects. However, crude oil prices, which are still 40% above pre-war levels, threaten to reverse this trend in the world's third-largest oil importer.

The May 4-8 Reuters poll of 46 economists forecast inflation, measured by the annual change in the consumer price index, rose to 3.80% in April from 3.40% in March. Forecasts ranged from 2.80% to 4.20%.

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The CPI inflation data is scheduled to be released on May 12.

The rise in fuel costs is expected to have a significant impact on prices, particularly in the food and restaurant sectors. Economists also expect some pass-through of higher global energy prices, which will be offset by the decline in gold prices.

Indian companies raised prices of Liquefied Petroleum Gas (LPG) in March, which is widely used as a cooking fuel in households, after the Middle East conflict disrupted energy supplies. This effect is likely to have carried into April, with economists noting that the impact is flowing over to April as well.

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While India has cut taxes on petrol and diesel to shield consumers from rising prices, economists say that persistently elevated global energy costs will eventually push up retail fuel prices.

"I am assuming that sometime in Q2, rather sooner than later, they will have to hike retail fuel prices because neither the fiscal buffers nor the buffers with the OMCs (oil marketing companies) are enough to withstand a prolonged shock," said ANZ economist Dhiraj Nim.

India's subdued inflation has been helped by softer-than-usual food price increases, but this tailwind may fade if the India Meteorological Department's warning of a below-normal monsoon lifts inflation and pressures the RBI to raise interest rates. Most economists polled last month expected rates to remain on hold through 2027.

Core inflation, which excludes volatile food and fuel prices, is expected to be at 3.55% in April. India does not publish official core inflation data.

Wholesale price index-based inflation likely rose to an annual 4.40% last month from 3.88% in March, the survey showed.