The Reserve Bank of India (RBI) may go for a rate change in case inflation touches 5 percent mark, a credit rating agency said. “In case, the inflation touches the 5% mark, it could provoke a rate change from the RBI,” CARE Ratings said. In the month of April, an uptick was witnessed in the wholesale and retail inflation. Inflation in wholesale prices rose to a 4-month high at 3.1 percent compared with 2.4 percent growth in the last month. In April, inflation in retail prices increased to 4.5 percent which is higher than 4.2 percent growth in the last month. In the same period last year, 2.9 percent growth was posted.
CARE Ratings view
The inflation trajectory would remain dependent on how the monsoons fare, the ratings agency said. “Going forward, inflation would remain contingent upon turnaround of monsoons. In addition to this, firming of global crude oil prices, HRA increases by state government, implementation of higher MSP from June onwards and demand side pressures from higher fiscal deficit pose risks to price levels,” CARE Ratings said.
The ratings agency said that the retail inflation will be in the range of 4.5-5 percent and wholesale inflation to be in the range of 3-3.5 percent during fiscal year 2019. CARE Ratings does not expect RBI to come out with any change in policy rates in the next month’s monetary policy.
The latest CPI inflation numbers show an increase in retail inflation along all the segments excluding food and beverages which remained more or less stable. The inflation in non-food components continued to remain at higher levels.
Meanwhile, India Ratings’ chief economist Devendra Kumar Pant said “The trajectory of RBIs policy in remainder of FY19 will be governed by the movement of oil prices.”