The risk of higher inflation could become a looming concern for India, experts say, as surging oil prices and monsoon fears come into play.
Surging oil prices and monsoon fears are driving up the risk of higher inflation in India, experts warn — even as the central bank appears poised to cut rates further, adding more pressure to increasing prices.
While core inflation excludes volatile fuel and food prices, rising energy costs would continue to put pressure on the consumer inflation through higher transport costs and heavy household use of petrol and diesel in India, experts say. The most significant near-term risks to India's inflation outlook stem from a potential uptick in global energy prices and the impact of the monsoon season on food prices, said Rajiv Biswas, Asia Pacific chief economist at IHS Markit.
The Reserve Bank of India said last week that"the short-term outlook for food and fuel inflation remains benign" but some uncertainties around the prospects for the monsoon persisted. But Capital Economics warned that"with core inflation still elevated, we think that further policy loosening will prove to be a policy mistake."
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