New Delhi: A survey conducted by Reuters found that retail inflation in India is likely to hit a 16-month high of 6.35 per cent in March.
The reading is in fact well above the Reserve Bank of India’s (RBI) upper tolerance band for the third consecutive month, mainly due to a sustained rise in food prices.
According to the report, the full impact of the spike in crude oil and global energy prices amid the Russia-Ukraine conflict in late February is not expected to be reflected in consumer prices until April as pass-throughs to consumers at fuel pumps were delayed. .
According to the survey, which was conducted between April 4 and April 8, 48 economists suggested inflation, as measured by the Consumer Price Index (CPI), rose to 6.35 per cent in March on an annualized basis, which It was 6.07 percent in February. This will be the highest reading since November 2020.
Referring to the seasonal pattern in the monthly change in food prices, Dheeraj Nim, an economist at ANZ, said, “We expect headline inflation to be 6.30 per cent (y-o-y) on a year-on-year basis as food prices continue to rise sequentially. There has been an increase. After three months of decline till February,” said
Food prices, which account for nearly half of the inflation basket, are expected to remain elevated as supply chain problems related to the Russo-Ukraine war disrupt global grain production, supplies of edible oils and fertilizer exports.
Palm oil prices also rose nearly 50 per cent this year. The rise in food prices is increasingly felt by millions of people living below the poverty line, who have already been hit by the pandemic on jobs and incomes.
Samiran Chakraborty, India’s chief economist at Citi, said the rise in global commodity prices would be reflected in March inflation data as well as edible oils.
“Though there was a delay in the start of the hike in petrol prices after the state elections, the retail prices have gone up by Rs 6.5 per liter in the last 10 days of March,” Chakraborty said.
However, the RBI has opted to keep interest rates stable even though inflation has gone well above its target and shows no signs of abating any time soon.
The central bank on Friday again left its key repo rate unchanged at a record low. However, analysts have begun to express concern that the right time to raise interest rates has already passed.
Kunal Kundu, India economist at Societe Generale, said, “They (RBI) are behind the curve. What the Fed’s actions have shown us is that the moment you realize you were wrong about inflation being temporary, you are forced to act more aggressively.”