Retail Inflation Accelerates To 4.58%, RBI Expected To Take A Hawkish Stance

Annual consumer price inflation (CPI) accelerated to 4.58 per cent in April, the government data showed on Monday. The rise in consumer inflation is incongruous to the easing of inflation for three months in a row until March when it had eased to 4.28 per cent, driven by lower food prices. Coming back to the April data, annual wholesale price inflation (WPI) last month also rose to 3.18 per cent from a year earlier, higher than a 2.47 per cent rise in March, as revealed by the government data released on Monday. The government data, on Monday, also highlighted that annual wholesale price inflation (WPI) of last month that accelerated, was facilitated by higher fuel and food product prices. Wholesale food prices in April rose 0.67 per cent year-on-year, compared with a fall of 0.07 per cent a month earlier, data showed.

"The Reserve Bank of India is likely to adopt a hawkish commentary in June," said Radhika Rao, an economist at DBS Bank in Singapore. The biggest risk that Asia's third-largest economy faces is rising crude oil prices, which hit $78 a barrel last week, their highest since November 2014 following prospects of new U.S. sanctions on Iran. India meets 80 percent of its oil needs from imports.

An increase in oil price of $10 a barrel could quicken inflation by about 1 percentage point and reduce economic growth by 0.2 to 0.3 percentage points, a senior finance ministry official told Reuters, before the release of the Monday's data. The International Monetary Fund (IMF), however, expects the economic growth could rebound to 7.4 percent in fiscal year 2018/19 beginning April, from an estimated 6.6 percent in the previous fiscal year.

At the same time, India's industrial output growth released on Friday slowed to a 5-month low of 4.4 per cent in March, dragged down by smaller increases in mining, but the Reserve Bank of India (RBI) is expected to hold interest rates in its next policy meeting amid growing inflation concerns. The Reserve Bank of India, which is due to hold its next policy meeting on June 6, is widely expected to hold rates after having kept policy rates unchanged for the fourth straight meeting in April.

Economists surveyed by Reuters had forecast 5.9 per cent growth in output compared with a downward revised 7.0 per cent annual increase in February. Annual output growth was 4.3 per cent during the fiscal year that ended in March 2018, lower than 4.6 per cent in the previous year, data released on Friday by the Ministry of Statistics shows.(With PTI, Reuters inputs)