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Indian Retail Inflation Likely to Drag Three-Month Low in April

Indian retail inflation likely eased to a three-month low in April on softening prices for vegetables and other perishable foods, a Reuters poll suggested, bringing the headline rate closer to the midpoint of the Reserve Bank of India‘s medium-term target. That reprieve would provide policymakers with some relief as they seek to keep prices under control amid growing risks that state-wide lockdowns and curfews imposed to tackle a record surge of COVID-19 cases could disrupt supplies and fuel prices.

Consumer price inflation was predicted to cool to 4.20% in April, just above the RBI’s 4% mid-point target and down from March’s four-month high of 5.52%, according to the poll of nearly 50 economists taken over the past week. Forecasts for the headline figure ranged from 3.90% to 6.15%.

“Base effects are significantly favourable in April, putting more than 150 basis points downward pressure on headline year-on-year inflation. Beyond this, onion prices have also fallen further,” noted Samiran Chakraborty, chief economist for India at Citi. “On the other hand, prices of food excluding vegetables continue to exert upward pressure on inflation. Fuel prices remained broadly stable in April, likely due to the state elections.” The RBI raised its inflation projection for the first half of this fiscal year to 5.2% last month, still within the central bank’s target range of 2%-6%.

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