India’s retail inflation 7pc, at 17-month high

NEW DELHI, April 12 (Reuters) - India's retail inflation accelerated to near 7 per cent year-on-year in March, its highest in 17 months and above the upper limit of the central bank's tolerance band for a third straight month, putting pressure on it to raise policy rates.
Annual consumer price-based inflation in March touched 6.95 per cent, pushed by rising prices of fuel products and some food items. The print was higher than the 6.35 per cent year-on-year forecast by economists in a Reuters poll, and 6.07 per cent in the previous month.
Economists said Tuesday's inflation numbers could prompt the central bank to raise rates as early as June as the next month's inflation could rise further due to higher retail fuel prices.
"With the MPC (Monetary Policy Committee) having signalled an imminent stance change, the rate hike cycle may begin as early as June, if the next inflation print doesn't significantly cool off from the March level," said Aditi Nayar, economist at ICRA.
"We expect to see 50-75 basis points of rate hikes by the end of September," she added.
Food prices, which contribute to nearly half of the consumer price index (CPI), climbed 7.68 per cent year-on-year in March, compared with 5.85 per cent a month before.
The full effect of crude oil price rises on food and other items will be seen in April as the Indian government delayed the pass-through of energy prices to consumers, economists said.
India's central bank is split between keeping rates low to help revive the pandemic hit economy and controlling the surge in retail prices.