(Fixes garble in dateline)
* June WPI seen at 5.80 pct y/y, CPI 7.95 pct v/s 8.28 pct
* Next central bank policy review Aug. 2
* Analyst expects central bank to hold rates
By Manoj Kumar
NEW DELHI, July 14 India's inflation probably
eased marginally in June after the new government curbed farm
exports, but a growing risk that drought will shrivel summer
crops could encourage the central bank to keep interest rates on
Prime Minister Narendra Modi, elected in May amid anger over
rising prices, has ordered a crackdown on hoarding to hold down
food prices and set limits on the export of staples, such as
onions and potatoes.
Presenting his first budget on Thursday, Finance Minister
Arun Jaitley vowed to keep the fiscal deficit at 4.1 percent of
gross domestic product in this fiscal year, while allocating
more funds to ease inflationary pressures.
"The monsoon this year appears more unpredictable," he told
lawmakers, adding that the government would take all steps
Consumer price inflation probably eased to 7.95
percent last month, down from 8.28 percent in May, while
wholesale price inflation eased to 5.80 percent, the
Reuters poll of economists found.
The government will release the data on wholesale prices on
Monday around 0630 GMT. Consumer price data is due at 1200 GMT.
Modi faces his first challenge as soaring prices for basic
food items, such as milk and potatoes, lifted retail food
inflation to 9.4 percent in May, driving wholesale inflation to
a five-month high of 6.01 percent.
The government is banking on stocks of food such as rice,
wheat and sugar from recent bumper harvests, but has few ways to
cap prices of fruits and vegetables that drive food inflation.
"The measures may prove to be inadequate in light of the
supply-demand dynamics associated with perishable products,
absence of adequate cold storages and inefficiencies in the
domestic supply chain," said Aditi Nayar, an economist at ICRA,
the Indian arm of rating agency Moody's.
Retail inflation has eased to about 8 percent, after staying
in near double-digit figures for the past two years, the highest
among the BRICS group of emerging economies - Brazil, Russia,
India, China and South Africa.
Economic growth has been stuck below 5 percent for two years
- the longest slowdown in more than a quarter of a century. The
economy is expected to grow slightly above 5 percent in this
fiscal year to March 2015.
In 2009 benchmark New York futures swept to a 30-year high
after the worst drought in nearly four decades forced India, the
world's top sugar consumer, to buy large quantities of the
sweetener from top producer Brazil.
The farm sector accounts for around 14 percent of India's
nearly $2 trillion economy, and two-thirds of its population of
1.2 billion live in rural areas.
Weak investments and industrial performance have hurt
economic growth, but figures on Friday showing that industrial
output grew 4.7 percent in May on the year bettered expectations
for a rise of 3.8 percent.
Output gained just 0.1 percent in the fiscal year that ended
RELIEF FAR AWAY?
Weak rainfall since a delayed start to the monsoon season
could push up food prices - further delaying a decision by the
Reserve Bank of India to cut interest rates and ease the flow of
credit to the economy.
"We believe a rate easing cycle is unlikely to commence
before the second half of the current fiscal, keeping interest
costs elevated for the productive sectors," said Nayar of ICRA.
Reserve Bank of India Governor Raghuram Rajan held benchmark
interest rates at 8 percent in the June policy meeting. He has
raised rates three times since taking charge last September. The
next policy review is due on Aug. 2.
On Thursday, Rajan said the central bank was "determined" to
make sure consumer inflation follows a "glide path" lower.
An RBI panel has recommended bringing down consumer price
index (CPI) inflation to around 8 percent by the end of January
2015 and to 6 percent by the end of the following year.
(Reporting by Manoj Kumar; Editing by Douglas Busvine and