Even as monsoon is predicted to be normal this year, its uneven distribution could spike food prices, and inflation is likely to edge further, says a report.
According to Dun & Bradstreet, rising fuel prices in India, which touched an all-time high, is likely to feed into other segments and keep the rate of inflation higher.
"The assumption of a normal monsoon has been one of the primary factors considered for improvement in demand in the current year.
"However, spatial distribution of rainfall needs to be monitored carefully before setting in firm expectations as uneven distribution of rainfall could flare up food inflation," said Arun Singh, Lead Economist D&B India.
Moreover, factors like geopolitical risks, escalating tensions in global trade, volatility in international crude oil prices and sharp depreciation in rupee underline the upside risk to inflation.
"Domestically, we look forward for the government to fulfil its commitment to revive investments, execute infrastructure projects and continue the policy momentum," Singh said.
The report further said the consistent growth clocked by the capital and infrastructure goods sector is likely to support the IIP growth rates going ahead.
D&B expects Index of Industrial Production (IIP) to have grown by 6.5-7.5 per cent during April this year.