India's March inflation accelerates amid rising virus cases

FILE PHOTO: Outbreak of coronavirus disease (COVID-19) in Mumbai
Manoj Kumar
·2 min read

By Manoj Kumar

NEW DELHI (Reuters) - India's retail inflation accelerated to a four-month high in March on higher food and transport costs amid rising coronavirus infection numbers and fears of a surge in some commodity prices due to lockdowns in some states.

Annual retail inflation rose 5.52% in March, up from 5.03% in February, and above the 5.40% forecast in a Reuters poll of economists, data released by the Ministry of Statistics showed on Monday.

Retail food prices, which account for nearly half of the basket of items used to calculate the inflation rate, increased 4.94% in March on year compared to 3.87% in the previous month.

Transport costs were up nearly 13% on year, after a more-than 8% rise in diesel and petrol prices so far this year, pushed up by higher federal and state taxes.

"Core inflation is expected to remain sticky despite a second wave of COVID-19 infections likely dampening demand," said Garima Kapoor, an economist at Elara Capital in Mumbai.

Kapoor said companies could face weaker supply-side responses in the face of higher commodity prices.

Core inflation, excluding food and fuel costs, was estimated in the range of 5.9% to 6.0% for the month by three economists, compared with 5.6%-5.9% in February.

India does not release official core inflation data.

Last week, the Reserve Bank of India left the benchmark repo rate unchanged at a record low of 4%, while raising its inflation projection for the April-September period to 5.2%, still within its target range of 2%-6%.

Some analysts have warned that local lockdowns in many states after the second wave of COVID-19 infections could push up prices of many commodities while derailing a nascent economic recovery.

With 168,912 new cases, India accounts for one in six of all new infections globally, although the figure is still well below the U.S. peak of nearly 300,000 new cases on Jan. 8.

India's economy is limping back to recovery and is projected to grow at around 11% in the current financial year that started on April 1, after an estimated contraction of about 8% in the previous fiscal year.

(Additional reporting by Aftab Ahmed and Nidhi Verma in NEW DELHI and Nivedita Bhattacharya in BENGALURU; Editing by Catherine Evans and Hugh Lawson)