Inflation likely to edge higher in May, uneven monsoon, petrol prices blamed

Petrol and diesel prices have been rising and there is no sign of a reduction on the horizon. Oil prices globally have breached the $80 per barrel mark and the likelihood of a return to normal, more comfortable levels, is slim. The bad news stemming from this is the likely impact on the economy itself. A report has highlighted the worrisome scenario that may be played out in terms of inflation. A Dun & Bradstreet report says that an uneven monsoon, plus fuel prices may push inflation higher.  

This comes even as reports of a normal monsoon in India had brought relief to the country. Now it emerges that there is a likelihood of uneven distribution of rain, which could lead to food prices rising. Dun & Bradstreet today indicated that inflation is likely to edge up further in its report due to these reasons. It said that CPI inflation is set to be in the range of 4.6-4.7 per cent and WPI inflation around 3.6-3.8 per cent in May. Arun Singh, Lead Economist D&B India said, "The assumption of a normal monsoon has been one of the primary factors considered for improvement in demand in the current year. However, spatial distribution of rainfall needs to be monitored carefully before setting in firm expectations as uneven distribution of rainfall could flare up food inflation".

Among the other factors to be watched for their impact on inflation, according to the report, were geopolitical risks, escalating tensions in global trade, volatility in international crude oil prices and sharp depreciation in rupee.

As far as action on the policy front is concerned, Singh said, "Domestically, we look forward for the government to fulfil its commitment to revive investments, execute infrastructure projects and continue the policy momentum".

Watch this Zee Business video

However, it was not all doom and gloom as far as forecasting is concerned. The report said the consistent growth clocked by the capital and infrastructure goods sector is likely to support the Index of Industrial Production (IIP) growth rates going ahead. In its projection, the report indicated that IIP may have grown by 6.5-7.5 per cent during April this year.