Retail Inflation in India Inflation Likely to Hold Steady Just Above 7% in June: Report
Retail Inflation in India Inflation Likely to Hold Steady Just Above 7% in June: Report
India's retail inflation likely held steady in June, but well above the Reserve Bank of India's tolerance limit for a sixth month as lower fuel and cooking oil prices offset higher services and food costs, a Reuters poll found.

BENGALURU: India’s retail inflation likely held steady in June, but well above the Reserve Bank of India’s tolerance limit for a sixth month as lower fuel and cooking oil prices offset higher services and food costs, a Reuters poll found.

Despite a substantial recent increase in food prices, rising at the fastest pace in nearly two years, overall inflation was partly contained after the government cut taxes on petrol and diesel and imposed restrictions on food exports.

But most economists warned the near-term outlook was highly uncertain as a heatwave last month pushed up vegetable prices. The government has also cut estimates of wheat production because of dry spells in northern India.

The July 4-8 Reuters poll of 42 economists showed inflation as measured by the consumer price index (CPI) was steady at an annual 7.03% in June, versus 7.04% in May.

Forecasts for the data, due at 1200 GMT on Tuesday, July 12, were in a 6.45%-7.70% range.

If realised, inflation would be above 7% for the third consecutive month and above the RBI’s 6% upper tolerance target for a sixth month.

“While several goods and services categories are likely to report higher inflation in June, fiscal measures undertaken by the government…will help to cap the upside in domestic prices across food and other segments,” noted Rahul Bajoria, chief India economist at Barclays.

“Still, services costs are trending higher, and a passthrough from higher commodity prices is evident across several sectors.”

The Reserve Bank of India (RBI) has raised interest rates by 90 basis points so far this year to 4.9% and is set to add more in coming months. RBI Governor Shaktikanta Das said recently inflation was unlikely to fall within the top end of its mandated target band until December.

Wholesale price inflation was seen only moderating slightly from May’s three-decade high of 15.88% to 15.50%, the poll showed.

Although consumer price inflation seems to be stabilising, widening trade and current account deficits due to high global crude oil prices pushed the rupee to a recent record low of $79.375, raising concerns over higher imported inflation.

A separate question in a recent Reuters poll asking what the rupee’s lowest point against the dollar would likely be over the course of the next three months gave a median of 80, with a range of 79.50-85.00/$.[INR/POLL]

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