Inflation In India Likely Rose To 4.58 Per Cent In June On Higher Food Prices: Economists' Poll

The July 3-10 Reuters poll of 55 economists predicted consumer price index inflation rose at an annual pace of 4.58 per cent in June, slightly faster than the 4.25 per cent recorded in May

Inflation in India likely snapped a four-month decline in June as food prices spiked making a cut in interest rates unlikely any time soon, according to a Reuters poll of economists. Reuters reported that the Reserve Bank of India (RBI) is also expected to resist pressure to raise rates.

The July 3-10 Reuters poll of 55 economists predicted consumer price index inflation rose at an annual pace of 4.58 per cent in June, slightly faster than the 4.25 per cent recorded in May.

Alexandra Hermann, senior economist at Oxford Economics, said, "We believe the RBI will tolerate a supply-side driven rise in food inflation as long as core price pressures continue to ebb within the bank's tolerance band.”

Uneven monsoon rains have damaged crops of some perishable foods and hindered the movement of goods, resulting in shortages of basic ingredients for Indian cooking, such as tomatoes, chillies and onions. The pressure on food prices is likely to persist over the coming months, making it less likely that inflation would return to the central bank's 4 per cent target in the near term.

Retail inflation dropped to 4.25per cent in May from 4.7 per cent in April, according to a data from the Ministry of Statistics and Programme Implementation. The consumer price-based index (CPI) inflation in May is lowest in 25 months. The food inflation also eased to 2.91 per cent in April. It was 3.84 per cent in the month of April. The food basket accounts for nearly half of the CPI. While, inflation in fuel and light also eased to 4.64 per cent, from 5.52 per cent in April.

Forecasts ranged from 4.10 per cent to 4.80 per cent, with over 90 per cent expecting inflation to be higher than May.

"The inflation print is likely to be impacted by the seasonality in vegetable prices, especially for tomatoes and onions," said Dipanwita Mazumdar, economist at Bank of Baroda. "Erratic rains and heatwave conditions have also impacted production of a few crops for which prices have seen an uptrend of late."

Prices of food items, which account for around half of the CPI basket, especially kitchen staples, have almost tripled in the past month, hitting low income households hardest.

Inflation in Asia's third largest economy is expected to average 5.0 per cent in the fiscal year ending on March 31, 2024, and the following year, a separate Reuters poll showed.