India’s retail inflation touched a four-month high in March, owing to a spike in food and fuel prices.
It though remained within Reserve Bank of India’s (RBI) range, said a Reuters poll.
The poll showed that retail inflation rose to 5.40% in March 2021 over the corresponding period, whereas even in February 2021 it was 5.03%. 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,” 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%-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.
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.