Indian inflation eases, but COVID-19 curbs risk stoking prices

A man sorts yams in a supply truck at a wholesale market in Mumbai, India, December 14, 2018. REUTERS/Francis Mascarenhas
  • April CPI rose 4.29% vs 5.52% in March
  • Food prices rose 2.02% vs 4.87% in March
  • COVID-induced supply bottlenecks may push up prices
  • Core CPI 5.4%-5.43% vs 5.9%-6.0% in March- economists

NEW DELHI, May 12 (Reuters) - Indian inflation eased to a three-month low in April as food costs rose more slowly, but lockdowns to contain the country's raging coronavirus epidemic risk creating supply bottlenecks that could fuel price pressures in coming months.

Annual retail inflation (INCPIY=ECI) rose 4.29%, down from 5.52% in March and near the 4.20% forecast in a Reuters poll of economists.

Food prices, which account for nearly half of the Ministry of Statistics' inflation basket, rose 2.02% compared with 4.87% in the previous month.

"Any comfort from this could be illusory," Rupa Rege Nitsure, chief economist at L&T Financial Services said, warning of a build-up of inflationary pressures that risked affecting wholesale prices first.

Concern about high global commodity prices and supply chain disruptions amid widespread curbs on movement led the central bank last month to raise its inflation projection for the six months to September to 5.2%.

That still places it within the bank's target range of 2-6%.

India's second COVID-19 wave, which official figures show is infecting around 350,000 people and killing around 4,000 per day, has forcednearly two-thirds of the country to introduce tough curbs that have slowed economic activity.

The likelihood that India will receive an average amount of rain in the 2021 monsoon should however help ease inflationary pressure as a normal rainy season generally translates into higher farm output. read more

April core inflation, excluding food and fuel costs, was estimated in the range of 5.4% to 5.43% by three economists, compared with 5.9% to 6.0% in March. India does not release official core inflation data.

Reporting by Aftab Ahmed; Editing by Alex Richardson

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