Decline in oil price to continue; risk to inflation moderate: Report

The decline in global crude oil prices is expected to continue, which will have a moderating impact on inflation, a report said. 

Brent crude prices have now declined to less than USD 70 per barrel (bbl), SBI Ecoflash said. 

Crude prices, which rose from USD 63/bbl in February 2018 to USD 86/bbl in October 2018, has started to decline recently, the report added. 

In the past one month, crude prices declined by around USD 16/bbl as some nations got waivers to import oil from Iran, amid signs that other OPEC members will pump more to offset any supply gap.

"We believe that the decline in oil price might continue. Even our analysis of global growth vis-a-vis oil prices suggest that since 2012, oil prices in the first half are always greater than or equal to the second half of a year," it said. 

The decline oil prices will also help the CPI inflation to remain moderate at 3.5 per cent for the next couple of months before reaching around 4 per cent by March 2019, it said. 

"For October, we expect inflation at between 3.5-3.6 per cent. Furthermore, the inflation may be close to 3 per cent for November or a tad lower. There is continued deceleration in food prices particularly in rural areas. The MSP pass-through is negligible," it said. 

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The government needs to ensure the procurement plan is implemented aggressively ahead of the Kharif season, the report added.