Retail price inflation in India likely rose last month after a three-month low in April, supported by rising food and energy prices, but remained within the Reserve Bank’s target range of India for the sixth consecutive month, according to a Reuters poll.
“In April, the retail prices of petroleum products remained unchanged due to the holding of several elections in the states, despite the rise in crude prices,” said Kunal Kundu, Indian economist at Societe Generale.
“But immediately after that, retail prices were increased about seven times in May itself, resulting in a substantial increase in that component of inflation.”
The June 4-9 poll of 40 economists showed that consumer price inflation (INCPIY = ECI) reached 5.30% in May compared to a year ago, after plunging to a higher three-month low to 4.29% in April.
If achieved, inflation will have remained within the RBI’s 2-6% comfort range for the sixth consecutive month.
While there have been fewer supply chain disruptions during recent pandemic shutdowns compared to last year, a general rise in global inflation has increased pressures on domestic prices.
“Rising international prices for commodities, including crude, edible oils and gold, are clearly impacting consumer inflation,” said Abhishek Upadhyay, senior economist at ICICI Securities PD.
Inflation is expected to average 5.0% this fiscal year, according to a Reuters poll of economists late last month. This was similar to the RBI’s estimated average of 5.1%, at its June meeting. Read more
Keeping inflation within the target range will likely help the RBI to focus its policies more on the economy, which has been hit by a second wave of coronavirus.
Even before that wave hit, Asia’s third-largest economy grew only 1.6% in the January-March quarter compared to a year ago. Read more
For this fiscal year, growth forecasts have been revised downward several times by economists and major institutions in recent weeks.
“Concerns about pent-up demand like last year are very reduced as people have spent a large chunk of their savings on health care,” said Yuvika Singhal, economist at QuantEco Research.
“The savings in the economy are depleted and… people would like to keep a certain amount of cash.”
While this suggests that demand would be subdued, rising input costs were likely to push some components of the inflation basket up.
The wholesale price index (INWPI = ECI) is expected to rise 13.07% in May compared to a year ago, compared to 10.49% in April.
“The upside risks stem from the widespread increase in input prices … starting to gradually trickle down to the final prices charged to consumers,” added Upadhyay of ICICI.
The poll also showed that industrial production (INIP = ECI) likely jumped 120.0% in April from a year ago, when it plunged 57.3% following a lockdown. strict imposed at the time.
India’s infrastructure production (ININFR = ECI) – which comprises eight main industries and accounts for about 40% of total factory output – rose 56.1% in April.
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