New Delhi: Retail inflation in India, Asia’s third-largest economy, may skidded marginally in February, because of lower food prices said economists in a Reuters poll.
However, they warned that rising crude oil prices will push inflation much higher in the coming months.
After Russia’s invasion of Ukraine, crude oil rates have skyrocketed. In March, crude rates have jumped 35 per cent which will in turn push up fuel, transport, and other related components of inflation this month.
Inflation, as measured by the consumer price index (CPI), likely slipped to 5.93 per cent in February on an annual basis, from 6.01 per cent in January, the March 3-9 poll of 36 economists predicted.
According to the report, forecasts for the data, due for release on March 14, ranged between 5.70 per cent and 6.40 per cent. Over one-quarter of respondents expected inflation to have remained above the Reserve Bank of India’s (RBI’s) 6.0 per cent upper threshold.
Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said, “I’m expecting the headline moderation in February to be led primarily by the food and beverages component, where adjusted monthly gains have softened from their recent peaks. Storm clouds have been brewing for a while...the best way to describe the inflation numbers from around Q2 onwards is that when it rains, it pours.”
Petrol prices have barely moved but are overdue a rise in coming weeks.
Kunal Kundu, India economist at Societe Generale, said, “Sharp increase in prices post the announcement of election results and its pass-through to transportation costs would push inflation higher,” referring to elections across five states over the past month.
Indian economy expanded 5.4 per cent in the October-December quarter, slower than the 6.0 per cent predicted by economists in a separate Reuters poll.
Focusing on growth, not inflation, the RBI has held its interest rates steady at record lows for nearly two years but is due to increase borrowing costs next quarter.
The latest poll also showed industrial output likely expanded 1.5 per cent in January from a year ago, compared with 0.4 per cent in December.