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India’s retail inflation probably rose in February

A woman wearing a protective face mask buys fruit in a market, amidst the spread of the coronavirus disease (COVID-19) in Mumbai, India, August 20, 2020. REUTERS/Hemanshi Kamani/File Photo

India’s retail inflation probably rose in February as food and fuel prices went up but remained within the Reserve Bank of India’s target range for a third straight month, a Reuters poll predicted.



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The March 5-9 poll of over 50 economists showed retail inflation climbed to 4.83% in February from January’s 4.06%.

“We think inflation will have rebounded in February, to 4.8%. The increase in domestic fuel prices last month suggest that transport inflation will have accelerated,” said Shilan Shah, India economist at Capital Economics. “What’s more, retail food price data point to a significant rebound in food inflation.”

No contributor expected retail inflation to rise above the RBI’s upper limit of 6.0%, even though Brent crude oil prices have reached highs not seen since the pandemic began. read more

Forecasts ranged between 3.80% and 5.40%.

The minutes of the RBI Monetary Policy Committee’s February meeting showed members raised concerns about upside risks to inflation, but the bank kept its repo rate at a record low 4.0%, saying it would ensure ample liquidity. read more

But despite that liquidity assurance Indian bond yields have surged, mirroring global yields as inflation expectations rise on an improved outlook for the global recovery.

India’s economy returned to growth last quarter after contracting in the first two quarters of this fiscal year. read more

“While MPC members did highlight some inflationary risks, the RBI has been very clear that its major focus continues to be managing the yield curve as well as keeping monetary policy accommodative to support growth,” said Sakshi Gupta, senior economist at HDFC Bank.

Inflation within its target band would allow the RBI to tackle rising bond yields and maintain a supportive growth environment.

The poll predicted industrial output rose 0.9% in January on strong manufacturing production and high demand.

Infrastructure output (ININFR=ECI) rose 0.1% in January from a year earlier, according to government data.


March 10, 2021

Our Standards: The Thomson Reuters Trust Principles.

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