According to a Reuters survey, India’s retail inflation rose to a four-month high in March, owing to increases in food and fuel rates, but stayed within the Reserve Bank of India’s target limit.
According to a Reuters survey, India’s retail inflation rose to a four-month high in March, owing to increases in food and fuel rates, but stayed within the Reserve Bank of India’s target limit. Retail inflation accelerated to 5.40 per cent in March from a year ago, compared to 5.03 per cent in February, according to a survey of more than 50 economists conducted April 5-8. The percentages predicted ranged from 4.60 to 6.11 per cent.
“While India’s core inflation has been elevated for some time, the recent acceleration in headline inflation is largely due to higher food prices,” said Tuuli McCully, Scotia Bank’s Asia-Pacific economist. “I believe the increase is a one-time occurrence, but the inflation forecast is fraught with dangers.”
On Wednesday, the RBI lifted its inflation forecast for the first half of this fiscal year to 5.2 per cent, well within the RBI’s target range of 2% to 6%. “With some cities already under COVID-19 lockdown and possibly more facing the same risk,” said Prakash Sakpal, senior Asia economist at ING. “Panic-buying like a year ago may set in to pressure inflation further up in the months ahead,” he added.
Concerns that rising COVID-19 cases could disrupt the nascent recovery led the RBI to keep the primary repo rate at a record low of 4.0 per cent and its monetary policy accommodative. After contracting for two straight months, Asia’s third-largest economy expanded 0.4 per cent in the October-December period, the worst recession in about four decades
On Thursday, India announced a new high of 126,789 COVID-19 cases, and a few states have tightened restrictions to stem the outbreak, citing vaccine shortages and demands for inoculations for children. A separate Reuters poll released last week forecast that the greatest danger to economic growth this fiscal year would be an increase in coronavirus cases and that the central bank would keep rates on hold.
“Until the COVID-19 danger is firmly behind us, the RBI will continue to see through elevated inflation and concentrate on supporting growth,” Sakpal added. According to the new survey, factory production fell 3.0% in February compared to the same month a year ago. Infrastructure output, which includes eight industries and accounts for around 40% of overall manufacturing work, fell by 4.6 per cent in February.
Coal, crude oil, natural gas, petroleum refining goods, fertilisers, steel, cement, and electricity were among the eight key sectors that shrank in February.