Source: The Hindu Business Line, Apr 18, 2016
New Delhi: Retail inflation is expected at 4.8 per cent in 2017-18 and fears in this regard are exaggerated as the country will continue to witness benign prices.
According to SBI’s research report Ecowrap, the Reserve Bank’s inflation forecast of 4-4.5 per cent will be “materially undershot” as CPI inflation is unlikely to breach the 4 per cent mark till July this year.
According to official data, wholesale inflation eased to 5.7 per cent in March on declining fuel prices and appreciating rupee.
“The decline was accentuated by decline in fuel and power inflation and manufactured products.
It may be noted that fuel prices were significantly cut on March 31, while the rupee has been on an appreciating trend since February 2017. These two factors have pushed down fuel and manufactured product prices,” it said.
International oil prices dipped in a month’s time to $49 per barrel from $55, reflecting in a Rs. 3.77 per litre cut in petrol prices and Rs. 2.91 in diesel. International rates have since climbed to $54 per barrel.
The rupee, which was at 66.7 to a dollar at February-end, is currently hovering around 64-level.
The report further noted that 2017-18 average CPI inflation is expected at 4.8 per cent with a downward bias, compared to the 2016-17 average of 4.5 per cent.
“Overall, inflation fears are exaggerated and we will continue to witness benign inflation numbers in the next couple of months,” it added.
Moreover, the difference between CPI and WPI, which was merely 25 bps in November 2016, has increased to 189 bps in March this year.
Since December 2016, WPI inflation is more than CPI inflation, the report said, adding this trend is expected to continue till the fourth quarter of this fiscal.