NEW DELHI: India’s retail inflation accelerated in May, at its fastest pace in six months as fuel and food prices rose at a higher pace, putting pressure on the central bank to tame prices amid a faltering economic recovery.
The Reserve Bank of India earlier this month warned that high energy prices could stoke inflation while cutting the growth forecast to 9.5per cent from 10.5per cent for the current fiscal year beginning April.
Annual retail inflation rose 6.30per cent year-on-year, up from 4.29per cent in April. Analysts had forecast retail inflation at 5.30per cent, according to a Reuters poll.
Economists fear a rise in prices after the second wave of coronavirus hit the economy while killing tens of thousands of people since April.
“We expect the CPI (consumer price inflation) prints to remain above 5per cent until September driving the annual average CPI to 5.2per cent for current fiscal year,” said Garima Kapoor, economist institutional securities, Elara Capital, Mumbai.
She said the central bank could tolerate high inflation close to the upper end of its 2-6per cent target band as the recovery from the second wave was likely to be more gradual and subdued than the first wave.Food prices, which account for nearly half of the Ministry of Statistics’ inflation basket, rose 5.01per cent year-on-year from 3.15per cent in the previous month.
A global recovery has led to a rally in commodity prices including crude prices. Brent crude futures have risen to over US$72 a barrel from a low closing price of US$19.33 in March 2020.
In India fuel prices have risen by over 30per cent from May of last year.
High energy and commodity prices are also raising input costs for companies in India pushing wholesale price inflation to at least a 15 year high of 12.94per cent year-on-year in May, according to Refinitiv data.
May core inflation, excluding food and fuel costs, was estimated in the range of 6.54per cent to 6.56per cent by three economists, after the data release.
India does not release core inflation numbers.
(Reporting by Aftab Ahmed and Manoj Kumar; Additional reporing by Rama Venkat in Bengaluru; Editing by Gareth Jones and Chizu Nomiyama)
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