India's March CPI inflation is expected 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 unseasonal rainfall damaging crops. Potato and onion prices declined m/m, while prices of other vegetables such as tomatoes increased 6% m/m after having declined for 10 straight months.
Winter crops such as wheat are also likely to have been affected, although the price increases of these to be contained, as the government has sufficient stocks. Inflation is likely to accelerate further in April, despite favourable base effects, low crude oil prices and economic slack.
"we expect concerns about inflation to be temporary and to ease as favourable base effects may lead to inflation of less than 5% by mid 2015, paving the way for a 25bps rate cut in June", said Standard Chartered in a report on Friday.
