Inflation set to ease, but is it just optics?

Inflation at 3-month low is set to be the headline as the govt releases Consumer Price Index data on Wednesday for the month of April. Inflation is seen easing down to 4.1% vs the spike of 5.5% in March. But reality is sorely different than the math of inflation. 

The pull on the numbers comes from an inflated high base effects from last year when the index shot up due to the unexpected lockdown. Now it will put a 150 basis points downward pressure on headline year-on-year inflation. Food inflation is expected to be lower at around 1.9% as against 4.9% in March, even though on a sequential basis prices of fruits, pulses and meat rose slightly. 

However, the recent build-up in input costs, driven by high global commodity prices and supply chain disruptions, remains a major concern.

Meanwhile, WPI inflation, which will be released on Friday, may continue to move higher and is expected to register a reading of around 9.3% as against 7.4% in March amidst higher commodity prices.