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Summary
Inflation has edged up, mostly due to rising food prices. With the pass-through effects of costlier energy still to show up and West Asia’s war threatening to flare up again, India’s Consumer Price Index may need hawkish attention.
Retail inflation edged higher to 3.4% from a year ago in March from 3.2% in February, government data issued on Monday showed. The main driver was dearer food, whose prices rose 3.9%, quicker than February’s 3.5% increase.
Inflation in housing, water, electricity, gas and other fuels was at about 2% while transport prices were flat. This may be a result of authorities preventing a pass through of global oil prices to consumers as a shield from the West Asian war’s fallout.
Overall, price pressures seem in control. But this could change as the effects of supply shortages begin to show up in various retail prices. Crude oil has sprung back above $100 a barrel as the US announced its own blockade of shipments to and from Iran’s Gulf ports.
In addition, parts of India recently had unseasonal rainfall, which may have damaged crops even as the India Meteorological Department on Monday forecast below-average rainfall during the June-September monsoon season.
Price levels, therefore, look inclined upwards. If inflation threatens to rise above India’s comfort zone, monetary policy action may be required. For now, New Delhi’s supply management is in focus.
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