SBI warns West Asia crisis impact yet to fully reflect in India’s inflation data

India’s Consumer Price Index (CPI) inflation rose marginally to 3.48% in April from 3.40% in March, remaining below the Reserve Bank of India’s (RBI) medium-term target of 4%. However, SBI Research said inflationary pressures linked to higher global energy prices, supply-chain disruptions and imported commodity costs could emerge more strongly in the coming months. 

In its latest Ecowrap report, SBI Research noted that despite fluctuations in exchange rates and global commodity prices, imported inflation has not risen sharply so far because retail fuel prices in India have largely remained unchanged.

“The impact of high global oil prices have not yet fully impacted Indian retail inflation,” the report said. It added that subsidised products and delayed pass-through of fuel costs have helped keep headline inflation relatively contained for now. 

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Food inflation rises

While headline inflation remained moderate, food inflation continued to move higher in April. Food inflation increased to 4.01% from 3.71% in March, driven mainly by higher prices of chicken, milk, refined oil and mustard oil. 

SBI Research linked the trend to rising global food prices. The report pointed out that the FAO Food Price Index recorded its third consecutive monthly increase in April, with vegetable oil prices seeing a particularly sharp rise globally.

The report also said markets would closely track El Niño developments and summer crop coverage, both of which could influence food inflation trends in the coming months.

LPG shortage

One of the sharpest increases in April inflation was seen in restaurants and accommodation services, where inflation surged to 4.20% from 2.88% in March. 

According to SBI Research, the increase reflects the impact of LPG shortages and rising operating costs for hospitality and food-service businesses.

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The report also noted an increase in inflation for paan, tobacco and intoxicants, while softer gold and silver prices helped moderate inflation in the personal care category.

Imported inflation

Imported inflation, which carries a weight of 21.84% in India’s CPI basket, eased slightly to 6.34% in April from 6.49% in March. 
However, SBI Research said state-level trends remained uneven. Telangana recorded imported inflation close to 12%, while Rajasthan, Sikkim and Andhra Pradesh reported imported inflation near 8%.

The report warned that any sustained rise in crude oil prices or further escalation in geopolitical tensions could eventually feed into transportation, logistics and manufacturing costs.

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Rural inflation higher

The report also highlighted that rural inflation remained higher than urban inflation in April. Rural CPI inflation stood at 3.74%, compared with urban inflation of 3.16%, largely due to stronger food-price pressures and supply-side constraints in rural areas. 

Despite these risks, SBI Research retained its FY27 CPI inflation forecast at 4.5%, while cautioning that the trajectory of inflation would depend on energy prices, monsoon trends and the evolving geopolitical situation in West Asia.