India’s inflation less of an immediate policy concern: Economists

New Delhi, June 12 (IANS) 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

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