India’s inflation likely fell to a four-month low in March: Poll

BENGALURU: India’s retail inflation is expected to have dropped to a four-month low in March on softer food and fuel prices and as already slowing demand likely plummeted due to a nationwide lockdown towards the end of the month, a Reuters poll found.

Price pressures will probably ease further this month as economic activity ground to a halt after Prime Minister Narendra Modi imposed a 21-day lockdown from March 25 in an attempt to curb the spread of the coronavirus.

“Inflation will continue to edge lower. Perhaps, at a faster rate than we had earlier expected on account of a slowdown in activity and decline in food inflation spikes,” said Sakshi Gupta, senior India economist at HDFC Bank.

Inflation is likely to have eased to 5.93% last month from 6.58% in February, the April 7-8 poll of over 40 economists showed.

If realized, it would be the lowest since November but still closer to the higher end of the Reserve Bank of India’s target band of 2-6%. Forecasts in the poll ranged between 3.90% and 7.00%.

“We expect a continued and sizeable drop in food prices. In addition, core inflation also fell with social distancing impacting the transport, communication and recreational component of the service sector,” said Kunal Kundu, India economist at Societe Generale.

“Falling crude prices and the pass-through – though offset by the government using the opportunity to raise taxes on petrol and diesel – should also help keep headline inflation in check.”

A separate Reuters poll of economists showed Asia’s third-largest economy likely expanded at its slowest pace in eight years in the quarter ending March and would slow further this quarter.

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