Retail inflation may hit 4-month low but still above RBI target: Poll

Reuters BENGALURU | Updated on March 09, 2018 Published on March 09, 2018


India's retail inflation likely eased to a four-month low in February on softening prices for vegetable and other perishable foods, but probably stayed above the Reserve Bank of India’s target, a Reuters poll showed.

Along with recent news that India in late 2017 was the world’s fastest–growing major economy, this may bring some comfort to policymakers in a delicate balancing act between rising price pressure and letting economic activity rip.

The annual increase in the consumer price index , the main measure of inflation in India, likely slipped to 4.80 per cent in February from 5.07 per cent the previous month, according to the poll of 30 economists. The forecast range was 4.36–5.60 per cent. The February inflation data is due at 5:30 PM on Monday, March 12.

If the data matches the consensus, February’s pace will be the lowest since October, and down from a 17-month high in December, but still above the RBI’s 4 per cent medium–term target for a fourth month.

And the small reprieve, if it comes, won’t likely last long. The central bank expects inflation to pick up to 5.1–5.6 per cent in April–September and then ease later on anticipation of for normal rainfall.

Main concerns

The main concern among economists is the government’s expansionary budget. From April, Prime Minister Narendra Modi’s administration plans to step up spending on welfare, particularly in rural areas, and increase the guaranteed price for agricultural produce—called the minimum support price (MSP)—ahead of national elections next year.

“We expect a sharp retreat in inflation in February led by a fall in perishable food prices that earlier forced the inflation upsurge from lows in June 2017,” said Abhishek Upadhyay, economist at ICICI Securities Primary Dealership. “But the big picture is the prospective MSP hikes, which continue to be the elephant in the room as far as the inflation outlook is concerned.”

Annual wholesale price inflation also likely eased to 2.50 per cent in February from 2.84 per cent in January, the poll showed. Separately, the poll showed industrial production likely rose 6.7 per cent in January from a year earlier, less than December’s 7.1 per cent growth.

Output in eight core infrastructure industries, which account for about 40 per cent of overall industrial production, rose 6.7 per cent in January from a year ago. Rupa Rege Nitsure, chief economist at L&T Finance Holding, said that putting aside a few sectors that maintained good growth tracks in January—like cement, refinery products and power generation—“overall growth moment remained flattish”.

Published on March 09, 2018

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.