"Although the market is spooked by the announced increase in MSP prices, the actual inflationary impact is likely to be far more moderate, as the ruling market prices are higher in many cases," BofAML said in a research note.
It further added that "we do not see much inflationary impact from the higher customs duty on mobile handsets, TV panels, processed food".
On the Reserve Bank's policy stance the report said, a rate cut is likely in August as the MPC will want to wait for good rains, like 2017, given the added uncertainty about agflation.
The Reserve Bank in its fifth bi-monthly review of this fiscal kept repo rate unchanged at 6 per cent and reverse repo at 5.75 per cent while raising the inflation forecast for the remainder of 2017-18 to 4.3-4.7 per cent.
"This (fiscal slippage) will largely be driven by lower- than-budgeted telecom proceeds, as well as tax collections," it added.
Finance Minister Arun Jaitley projected 3.3 per cent fiscal deficit for the next fiscal. Besides, the fiscal deficit estimate for 2017-18 has been re-calibrated to 3.5 per cent as against 3.2 per cent of the budget estimate for that year.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)