Upside risks to inflation persist despite prediction of a good monsoon and might deter the Reserve Bank from going in for a rate cut in the near future, says a Dun and Bradstreet (D&B) report. It said , rise in global commodity prices, possibility of El Nino, increase in house rent allowance under 7th Pay Commission and the initial impact on prices due to GST will add to the upside risks to inflation.
El Nino refers to warming of equatorial waters of the Pacific that affects monsoon pattern in India. Moreover, core inflation without food and fuel has remained sticky for a protracted period despite weak demand. D&B expects the CPI inflation to be in the range of 3.5- 3.7 per cent and WPI inflation to be 5.4-5.6 per cent during April this year. As per official data, retail prices jumped to a 5- month high of 3.81 per cent in March while WPI-based inflation slipped to 5.70 per cent in March.
“While the prediction for monsoon for 2017 has been near normal, apprehension over development of El Nino phenomenon and global commodity prices might keep upside risks to inflationary pressure elevated and is likely to deter RBI from any rate cut in the near term,” said D&B India lead Economist Arun Singh.