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India’s consumer price index, a measure of consumer inflation in the economy is expected to rise in May, as compared to that in April, on acceleration in food and fuel prices as delay in monsoon arrival led to soaring prices. However, food prices may dampen in the coming months after the South-west monsoons have hit the coastal borders of Kerala.
According to our poll of 10 economists, CPI inflation is expected at reach 5.5 percent in May, compared to the 5.39 percent in April.
In the recent bi-monthly monetary policy meeting, Reserve Bank of India Governor Raghuram Rajan made it clear that the target is to achieve five percent inflation by March 2017, while giving hints of further easing in the futures, besides concerns over upward pressure on food and commodity prices.
Retail inflation has almost more than halved since Nov 2013 but spike in petrol and diesel prices by more than five percent since May 1 has led to market hopes of a rise in May inflation. Items such as sugar and milk in the consumer sector are likely to shoot up prices.
Further, the government has also hiked service tax by 0.5 percent on food, telecom and restaurants, with effect from June 1, which is more likely to weigh high on consumer pockets.
Asia’s third largest economy grew at 7.9 percent in the quarter to March, outpacing China’s 6.7 percent growth, and is projected to expand by around 7.75 percent in the current fiscal, starting April 1. Meanwhile, expectations for a good monsoon this season is likely to boost growth and tame food and agricultural prices.
Monsoon remains an important contributor to Asia’s third largest economy, directing ways for agricultural production and stands critical for the country’s 263 million farmers and water-intensive crops such as rice, paddy, cotton, sugarcane and corn.
