India says retail inflation may accelerate on weak monsoon, fuel price rise

NEW DELHI: India’s retail inflation could rise as a result of recent fuel price hikes and weaker-than-normal monsoon rains, the country’s finance ministry said in a report on Saturday, as energy supply disruptions continue because of the Middle East conflict.

The duration of the Strait of Hormuz disruption remains the “single most consequential variable” for India’s external and price outlook, the report said.

A sharp rise in upstream price pressures, along with recent increases in fuel prices, suggests a gradual pass-through to retail inflation through higher transport, energy and food-related costs in the coming months.

India hikes fuel prices for second time in a week

A significant rainfall deficit coupled with current geopolitical conditions could translate into food inflation, weakening rural demand and aggregate growth, the report said.

The near-term outlook for the Indian economy is one of cautious resilience .

The confluence of elevated global energy prices, a depreciating rupee, rising upstream cost pressures and the prospect of a below-normal monsoon calls for sustained policy vigilance, the report said.

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India’s annual retail inflation rose marginally to 3.48% in April and so far remains below the central bank’s target.

The finance ministry releases its economic report every month.