Retail inflation likely rose in March but stayed within target

By: |
April 9, 2021 9:55 AM

India's retail inflation edged up to a four-month high in March, led by an increase in food and fuel prices, but remained within the Reserve Bank of India's target range, a Reuters poll predicted.

India's retail inflation, Reserve Bank of India's target range, RBI raised its inflation projection, COVID-19 lockdown, growth in October Decemeber quarterThe RBI kept the key repo rate at record low 4.0% and its monetary policy accommodative amid concerns of rising COVID-19 cases that could derail the nascent recovery.

India’s retail inflation edged up to a four-month high in March, led by an increase in food and fuel prices, but remained within the Reserve Bank of India’s target range, a Reuters poll predicted. The April 5-8 poll of more than 50 economists showed retail inflation rose to 5.40% in March from a year earlier as opposed to 5.03% in February. Forecasts ranged from 4.60% to 6.11%.

“Although India’s core inflation has remained elevated for a while, the recent acceleration in headline inflation largely reflects higher food prices,” said Tuuli McCully, head of Asia-Pacific economics at Scotia Bank. “I expect the pickup to be a temporary phenomenon, yet there are significant risks surrounding the inflation outlook.”

The RBI raised its inflation projection for the first half of this fiscal year to 5.2% on Wednesday, still within the RBI’s target range of 2%-6%. “With some cities already under COVID-19 lockdown and maybe more facing the same risk, the panic-buying like a year ago may set in to pressure inflation further up in the months ahead,” said Prakash Sakpal, senior Asia economist at ING.

The RBI kept the key repo rate at record low 4.0% and its monetary policy accommodative amid concerns of rising COVID-19 cases that could derail the nascent recovery. Asia’s third-largest economy grew 0.4% in the Oct-Dec quarter after contracting for two consecutive quarters, its deepest recession in about four decades.

India reported a record 126,789 COVID-19 cases on Thursday and a few states have renewed restrictions to contain the spread while complaining of vaccine shortages and demanding inoculations for younger people. A separate Reuters poll last week predicted the biggest risk to economic growth was a surge in coronavirus cases and that the central bank would keep rates on hold this fiscal year.

“The RBI will continue to see through elevated inflation and focus on supporting growth at least until the COVID-19 risk is firmly behind,” added Sakpal. The latest poll also predicted industrial output contracted 3.0% during February from a year earlier. Infrastructure output, which accounts for about 40% of total industrial production and comprises eight sectors, contracted 4.6% in February.

Production of all eight core industries – including coal, crude oil, natural gas, petroleum refinery products, fertilizers, steel, cement and electricity – shrank in February.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Reforms on course despite second Covid wave: FM Nirmala Sitharaman
2Outlook negative: Fitch Ratings affirms BBB- rating for India, says recent Covid-19 surge may delay GDP recovery
3MPC members worried over fallout of low rates for savers