Headline retail inflation rose to a 14-month high of 3.48% year-on-year in April, but the rate was below what most economists estimated, as price pressures were yet to build up in most non-food items, except precious metals, despite the risks posed by the West Asia war.

April inflation was only marginally higher than the 3.4% recorded in March. The median inflation forecast for April, based on a poll of 10 economists by FE was 3.85%. None of them estimated the inflation to be below 3.5%.   

According to data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Tuesday, the y-o-y rise in consumer price index (CPI) was largely driven by higher food and precious metal (gold and silver) prices.

Core inflation, which excludes food and fuel segments, remained steady at 3.31% in April. The rural and urban inflation stood at 3.74% and 3.16% y-o-y, respectively.

The headline inflation figure remained below the RBI’s medium-term target of 4% for the 15th consecutive month. Some economists have projected a pause in rate cuts amid the upside risks in view of the West Asia crisis, while others see a rate hike cycle around the corner as inflation risks loom.

So far, the government and state-owned oil marketing companies have absorbed much of the rise in global crude oil prices, with retail fuel prices remaining unchanged.

What do economists say?

Rajani Sinha, chief economist at CareEdge Ratings, said while the direct pass-through to consumers is limited, higher energy prices could still exert indirect pressure through rising input and transportation costs. “In addition, concerns around a higher probability of an El Nino event this year pose upside risks to food inflation,” Sinha said.

Megha Arora, director at India Ratings and Research, said high demand for investing in secure assets like gold and silver, amid geopolitical tensions in West Asia drove the inflation. “Fuel inflation remained muted due to the base effect. Fuel price pass-through remained variable, with transport reflecting negative inflation, while costlier commercial liquified petroleum gas (LPG) reflected in higher costs for restaurant services, which increased to 4.2%,” Arora said.

The five key items with high inflation were silver jewellery (144.34%); coconut:copra (44.55%); gold, diamond, and platinum jewellery (40.72%); tomato (35.28%); and cauliflower (25.58%), MoSPI said in a statement. Additionally, pan, tobacco and intoxicants inflation was at 4.76% y-o-y. Food and beverages inflation was 4.01% and food inflation was 4.2%.

Restaurants and accommodation services had inflation of 4.2%, due to higher LPG prices for these establishments which led to higher prices being charged. Personal care etc. had the highest inflation of 17.66%, mainly due to precious metals with silver and gold propping up the number.

Among non-food items, the global energy price shock triggered transmission into commercial LPG cylinder prices (up by `1,303 per cylinder between early-March to early-May 2026) and other industrial fuels, Aditi Nayar, chief economist at Icra, said.

“This, along with upward revisions in the prices of aviation turbine fuel (ATF) and premium petrol and diesel prices is likely to see full pass-through to the CPI print for May, exerting upward pressure on various items including LPG cylinders, PNG, airfares, and restaurants. This is expected to push up the non-F&B (food and beverages) CPI inflation print in May.”

Madan Sabnavis, chief economist at Bank of Baroda, highlighted two threats that could build up to potential inflation. “An increase in retail prices of petrol and diesel due to higher crude oil prices and El Nino and its impact on kharif crop and hence food inflation.”
He also stated that the depreciation of the rupee will also push up imported costs. “We can expect a long pause for the time being (on rate cuts). We do believe there will be a rate hike towards the end of the year if inflation crosses the 5% mark,” Sabnavis said.

The RBI, in its first monetary policy of FY27, kept the policy repo rate unchanged at 5.25%, while warning of lower growth and higher inflation amid the West Asia crisis. The central bank estimated CPI inflation at 4.6% for FY27, with quarterly variations ranging from 4% in Q1 to 5.2% in Q3. The RBI has projected core inflation at 4.4% for FY27.

India Ratings believes the headline inflation is likely to further rise to 3.6% in May in case of no pass-through of high energy prices to consumers as well as due to similar gold and silver prices. Icra expects CPI inflation to harden to 4.1% in May.