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Retail inflation seen at 4 pc in April
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SME Times News Bureau | 07 May, 2021
A high base and an unseasonal drop in some food prices will push CPI
inflation down to 4.0 per cent in April, Barclays said in a research
report on Friday.
According to the report, Core inflation will
stay elevated, and rising commodity prices globally may pose some
challenges in coming months
The CPI inflation data for April is expected to be released by the statistics ministry on May 12.
"We
expect CPI inflation to fall to 4.04 per cent y/y in April, below the
January low and down from 5.5 per cent in March. The drop in inflation
will be driven primarily by two factors - a high base owing to last
year's pandemic-related lockdown, and an unseasonal fall in some food
prices," Barclays said.
This year, despite the new restrictions,
supply chains have not broken down to the same extent as 2020 and hence
the effect on perishable prices has been opposite, with reduced traffic
in stores causing prices to fall.
Looking at the details, the
investment banker said it expect food prices to rise 0.1 per cent m/m,
which is significantly below the seasonal trend typically seen in the
lean season before sowing.
Prices for cereals, vegetables and
dairy products remain in check and are offsetting the increase in prices
of non-perishable items, such as cooking oil, pulses and prepared
foods.
Still there is a limit to how much perishable prices can
fall, and the unusually low prices could pose upside risks to food
inflation in H2 21. Overall, we forecast food prices will rise 1.8 per
cent y/y in April, the research report said.
Among other sub
components, fuel costs likely declined modestly in April, but may
rebound in May, as prices have started to rise following the completion
of recent regional elections.
Barclays has forecast core
inflation will ease to 5.4 per cent, from 5.7 per cent in March. In
addition to increases in the education and healthcare components, the
expectation is that rising gold prices to add to upward pressure on m/m
momentum.
We believe concerns over the increase in core WPI
inflation are overblown and expect the pass- through from higher
commodity prices to be limited by weak underlying demand, the report
said.
Research by the RBI also suggests that the rise in core WPI
inflation will pass through only to core goods CPI inflation (22.0 per
cent weight in CPI basket) and will amount to just 20bp for every 100bp
rise in core WPI in the current environment.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
|
64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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