The inflation in India likely to accelerate further in April, despite favourable base effects, low crude oil prices and economic slack. However, inflation concerns to be temporary and to ease as favourable base effects pull inflation below 5% by mid- 2015, paving the way for a 25bps rate cut in June.
"We expect CPI inflation to have picked up to 5.6% y/y in March from 5.4% y/y in February as prices of food, especially vegetables and fruits, rose due to crop damage from unseasonal rainfall", said Standard Chartered on Friday.
While potato and onion prices declined m/m, prices of other vegetables, such as tomatoes, increased 6% m/m after falling for 10 straight months. Winter crops such as wheat are also likely to have been affected, although their price increases likely to be contained, as the government has sufficient stocks.
