India's inflation less of an immediate policy concern: Economists
New Delhi, June 12
Economists on Friday said while a build-up in price pressures is being watched closely against the backdrop of the ongoing West Asia conflict, India's inflation is at still below the mid-range of the 2-6 per cent target, and thereby less of an immediate policy concern.
India's retail inflation stood at 3.93 per cent in May, remaining below the Reserve Bank of India's medium-term target of 4 per cent, according to provisional data released by the Ministry of Statistics and Programme Implementation. However, it slightly inched up from 3.48 per cent recorded in April.
Radhika Rao, Senior Economist and Executive Director, DBS Bank, said that contribution from the food segments likely rose on perishables (including vegetables), edible oils, cereals, pulses, milk and related categories, not helped by heatwave conditions in some parts of the country.
"Concurrently pump fuel prices were increased in a staggered fashion since mid-May, besides higher CNG and commercial LPG (this month), imparting first and second derivative impact through the coming months," she mentioned.
India's May inflation is consistent with the central bank's view that current inflation readings remain manageable.
"However, policymakers continue to closely monitor upcoming inflation prints as higher input costs gradually filter through from downstream industries to consumers, weather-related risks unfold, and the progress of the monsoon season becomes clearer," said Rao.
According to Garima Kapoor, Deputy Head of Research and Economist at Elara Capital, CPI Inflation for May came to a tad below the expectation of 4 per cent despite the pass-through of high fuel prices and elevated food prices.
"With recent measures announced by the RBI and the government amid the likely expected resolution of the West Asian crisis, the macroeconomic backdrop has turned less adverse. We see inflation averaging 5.2-5.3 per cent in FY27 and see RBI hiking rates by 50bps in H2 FY27," Kapoor mentioned.
— IANS
Reader Comments
Good that RBI is not panicking. The heatwave and global tensions are temporary. Wait for the monsoon to arrive - kharif sowing will improve, vegetable prices will cool down. Patience is key. 👌
"Less of an immediate policy concern" - classic economist speak. Meanwhile, the aam aadmi is cutting down on chai and biscuits to save money. The gap between data and daily life is getting bigger. Hope the government takes real steps before Diwali.
Sensible analysis. RBI's target is 4%, and we're at 3.93% - that's basically on target! The fuel price hikes are unfortunate but necessary given global crude rates. Let's trust the experts and wait for full monsoon impact. Good to see India not overreacting like some Western central banks.
5.2-5.3% average for FY27? That's still under 6% upper band. But 50 bps rate hike will make my home loan EMI shoot up! 😭 I wish policymakers would spare a thought for middle-class families taking loans to build a roof over their heads.
The heatwave impact on perishables is real. My tomato vendor in Bangalore doubled prices overnight. But honestly, compared to Sri Lanka or Pakistan, we're blessed. Inflation management under Modi government has been decent given global headwinds. Focus on long-term stability is right.
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