India’s inflation was 5.52% in May: Poll

The Dollar Business Bureau

India’s consumer price inflation edged up to 5.52 percent in May due to higher prices of food and fuel, according to a poll of economists. They also predicted good monsoon rains would temper the coming months and give central bank room to ease further.

The survey, of over 20 economists by Reuters, predicted that yearly consumer price inflation pushed up to 5.52 percent in May compared to 5.39 percent in April.

If the survey’s predictions prove correct, then it would put inflation beyond the Reserve Bank of India's set target to restrict it around 5 percent by March next year and 4 percent above the medium-term. This means the inflation is uncomfortably near to the 17-month high of 5.69 percent in January.

However, India's metrological department has kept its earlier forecast of above average rainfall, developing hopes of farm output revival, in turn leading to reduced prices for food and interest rates.

Several economists predict inflation to come down in the coming months. On the other hand, some economists signaled that both lower inflation and further policy rate cuts by the RBI are dependent on the monsoon rains, which cannot be relied upon as was done in the past.

Raghuram Rajan, Governor, RBI, also put a more cautious attitude at the policy meeting of the bank held on Tuesday against the meeting he had in April.

The governor said the central bank was looking for space to ease the rates. He stated that a good monsoon and strategic stock management by the government were prerequisites to balance inflationary pressures in the future. The survey also highlighted that industrial output is increased by 0.5 percent in April, compared to 0.1 percent a month earlier.

Economists also expect that trade deficit in India has increased to $5.40 billion in May, higher from the earlier $4.84 billion.