India's already-high inflation likely climbed further in September: Reuters poll
By Indradip Ghosh
BENGALURU (Reuters) - According to a Reuters poll, retail inflation in India likely rose further above the central bank's medium-term target last month as food prices rose on persistent supply disruptions, reducing the likelihood of another rate cut.
Persistently high prices have hurt the recession-hit economy, which hit a record 23.9% from April to June, despite the Reserve Bank of India cutting its key rate by a cumulative 115 basis points since the pandemic began.
Although the government has eased some lockdown restrictions to help the economy, disruptions in the supply chain have shown little sign of decreasing as the virus continues to spread rapidly in India.
The Reuters poll of 47 economists from October 6-8 found that consumer prices rose 6.88% last month from a year earlier. This is the highest value in five months and faster than August's 6.69%.
If this were to happen, inflation would be above the upper end of the RBI's medium-term target range of 2% to 6% for the sixth consecutive year.
"Accelerating food inflation and persistent virus-related disruptions in supply have kept CPI headline inflation higher than expected, but price pressures should ease soon," said Shilan Shah, chief Indian economist at Capital Economics.
Above average rainfall this year, a key determinant of agricultural yields, should help ease pressure on food prices in the months ahead.
However, above-target inflation is expected to keep the RBI on the sidelines for the remainder of this year, although the Indian economy is expected to see its first decline since 1979 this year.
The Indian government appointed three new external members to the Monetary Policy Committee on Monday after postponing the final policy-setting meeting, which is due to conclude later on Friday.
"We assume that the RBI is still aware of the price pressures, but maintains its accommodative stance, especially because it is led by food. Interest rate cuts are delayed but not denied," said Rini Sen, Indian economist at ANZ.
The survey also forecast that industrial production declined for the sixth straight month in August, falling 7.5%, the longest decline since June 2009, as infrastructure production, which accounts for around 40% of total industrial production, fell 8.5 % decreased.
(Reporting by Indradip Ghosh; survey by Shaloo Shrivastava, Md Manzer Hussain and Manjul Paul; editing by Hugh Lawson)
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