BENGALURU: India’s retail inflation is expected to have risen above the Reserve Bank of India’s (RBI) medium-term target of 4% in June for the first time in 16 months, according to a Reuters poll of economists.
Consumer inflation is forecast to increase to 4.3% in June from 3.93% in May, driven by higher food and fuel prices, the impact of the US-Iran conflict and concerns over a weaker monsoon.
Official inflation data is scheduled to be released on July 13.
What Factors Are Driving Inflation?
Economists said rising food and fuel costs were the main contributors to the increase in consumer prices.
Higher global energy prices linked to tensions between the United States and Iran, along with a weaker-than-expected monsoon, have added pressure to inflation.
Retail fuel prices also remained elevated after state-owned fuel companies increased prices four times in May, raising transportation and logistics costs.
What Are Economists Saying?
Kunal Kundu, India economist at Societe Generale, said the expected increase reflects strengthening prices in food, fuel and selected service sectors rather than broad-based inflation.
He added that although wholesale prices have risen sharply due to higher global commodity costs, the impact on consumer prices is expected to remain gradual.
How Could the Monsoon Affect Inflation?
Economists warned that inflation could rise further if El Niño weakens India’s June-to-September monsoon season.
Poor rainfall could reduce agricultural output, leading to higher food prices in the coming months.
What Is the RBI’s Position?
The Reserve Bank of India kept its benchmark interest rate unchanged at 5.25% during its last monetary policy meeting.
However, economists continue to monitor inflation risks closely, particularly as geopolitical tensions threaten further increases in global oil prices.
What Do Wholesale Inflation Figures Show?
The Reuters survey also projected India’s wholesale inflation to ease slightly to 9.15% in June from 9.68% in May.
Core inflation, which excludes food and fuel prices, is estimated at 3.95%, although India does not officially publish core inflation data.