Retail inflation in India hit a four-month high in March, amid soaring food and fuel prices.
It remained in the Reserve Bank of India (RBI) range, however, according to a Reuters poll.
The poll showed that retail inflation rose to 5.40% in March 2021 over the corresponding period, while even in February 2021 it was 5.03%. The forecast ranged from 4.60% to 6.11%.
“Although India’s core inflation has remained high for some time, the recent acceleration in headline inflation largely reflects rising food prices,” said Tuuli McCully,
responsible for the Asia-Pacific economy at Scotiabank.
“I expect the recovery to be a temporary phenomenon, but there are significant risks surrounding the outlook for inflation,” he added.
The RBI had 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% to 6%.
“With some cities already under lockdown from COVID-19 and possibly more facing the same risk, panic buying like a year ago could put pressure on inflation in the months to come,” Prakash said. Sakpal, Senior Economist for Asia at ING.
The RBI has kept the policy rate on pensions a record 4.0% and its monetary policy accommodative amid fears of an increase in COVID-19 cases that could derail the nascent recovery.
Asia’s third-largest economy grew 0.4% in the October-December quarter after contracting for two consecutive quarters, its worst recession in about four decades.
A separate Reuters poll last week predicted that 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 high inflation and will focus on supporting growth at least until the COVID-19 risk is firmly behind,” Sakpal added.
The latest poll also predicted that industrial production contracted 3.0% in February from the previous year.
Infrastructure production, which accounts for around 40% of total industrial production and comprises eight sectors, contracted 4.6% in February.
The output of the eight major industries – including coal, crude oil, natural gas, petroleum refining products, fertilizers, steel, cement and electricity – fell in February.