Inflation in India is likely to remain elevated in the near terms but government policies will prevent it from rising further, S&P Global Ratings Economist (Asia Pacific) Vishrut Rana said on Tuesday.
In July, the consumer price index based retail inflation spiked to 15-month high of 7.44 per cent in July, with specific food commodities mainly driving the increase. Speaking at the ‘Monthly Asia-Pacific Credit Focus’ webinar, Rana said in India the monsoon has been very patchy and overall rain was about 11 per cent below normal. “That is a significant concern as it can affect grain prices in India over next few months,” he said.
The government has already imposed export curbs on rice and levied a 40 per cent export duty on onions to make available enough stock in local market ahead of the festive season. “Supplies remain very strong and the government is likely to step in to prevent significant increase in commodity, wheat and rice prices. It will help to keep food price inflation little bit low,” Rana said. Tomato prices, which had skyrocketed in July, had started cooling in late August. The significant spike in vegetable prices is coming down, Rana said. “Overall, the inflation environment for India will depend on energy prices. Food prices will remain elevated but is unlikely to go up because of public policies.
We expect overall inflation to remain elevated but not rising further for India over the next few months,” Rana added. The finance ministry in its monthly report had last month said that price pressure on food items is expected to be transitory, but the government and RBI need to step up vigil to deal with elevated inflationary pressure. Going forward, while domestic consumption and investment demand are expected to continue driving growth, global and regional uncertainties and domestic disruptions may keep inflationary pressures elevated for the coming months, warranting greater vigilance by the government and the RBI, it had said.