A moderate outlook for commodity prices suggests that core inflation would remain sub-4% in the ongoing quarter-ICRA Research

Despite the favourable monsoon, primary food inflation averaged nearly 13% in 2013-14, partly driven up by the spike in vegetable prices in the second half of 2013 and elevated inflation related to non-vegetarian protein products and cereals. Notably, inflation related to cereals, non-vegetarian protein items, milk, vegetables and fruits exceeded 8% in March 2014, highlighting that food price pressures remain pervasive in light of supply side issues and intermittent weather-related disruptions. Such factors are expected to keep food inflation firm in the ongoing quarter. Subsequently, the magnitude, timing and spread of monsoon rainfall would critically impact sowing patterns, yields as well as the trajectory for food inflation.

The second round effect of higher diesel prices and the base effect may continue to push up core-WPI to an extent in the coming months. However, a moderate outlook for commodity prices suggests that core inflation would remain sub-4% in the ongoing quarter. Additionally, inflationary pressures would be impacted by the extent and timing of reset of electricity tariffs in the current fiscal.

Powered by Capital Market - Live News