India's retail inflation probably rose in February as food and fuel prices went up, but remained within the Reserve Bank of India's target range for a third straight month, a Reuters poll predicted. The March 5-9 poll of over 50 economists showed retail inflation climbed to 4.83 per cent in February from January's 4.06 per cent.
"We think inflation will have rebounded in February, to 4.8 per cent. The increase in domestic fuel prices last month suggest that transport inflation will have accelerated," said Shilan Shah, India economist at Capital Economics.
"What's more, retail food price data point to a significant rebound in food inflation." No contributor expected retail inflation to rise above the RBI's upper limit of 6.0 per cent, even though Brent crude oil prices have reached highs not seen since the pandemic began. Forecasts ranged between 3.80 per cent and 5.40 per cent.
The minutes of the RBI Monetary Policy Committee's February meeting showed members raised concerns about upside risks to inflation, but the bank kept its repo rate at a record low 4.0 per cent, saying it would ensure ample liquidity. But despite that liquidity assurance Indian bond yields have surged, mirroring global yields as inflation expectations rise on an improved outlook for the global recovery.
India's economy returned to growth last quarter after contracting in the first two quarters of this fiscal year.
"While MPC members did highlight some inflationary risks, the RBI has been very clear that its major focus continues to be managing the yield curve as well as keeping monetary policy accommodative to support growth," said Sakshi Gupta, senior economist at HDFC Bank. Inflation within its target band would allow the RBI to tackle rising bond yields and maintain a supportive growth environment. The poll predicted industrial output rose 0.9 per cent in January on strong manufacturing production and high demand.
Infrastructure output rose 0.1 per cent in January from a year earlier, according to government data.