India consumer inflation likely topped RBI's 4% target in June: Reuters poll

By Pranoy Krishna

BENGALURU, July 9 (Reuters) - India's ‌consumer inflation likely ​breached ​the central bank's medium-term target of 4% in June for the first time in 16 months, according to a Reuters poll, as higher food and fuel prices, ‌the U.S.-Iran war and a weak monsoon added to cost pressures.

Consumer inflation, measured ⁠by the annual change in the consumer price index (CPI), is expected to have quickened to 4.3% in June from 3.93% ‌in May, 37 economists forecast ‌in the poll conducted July 3-9.

Estimates for the data, due to be released on July 13, ranged from 3.65% to 5.50%.

This would also be the highest inflation reading since India introduced ​its revised consumer price index series with a new base year and updated consumption basket in January.

"The expected increase is less a reflection of broad-based inflationary pressures and more a ⁠consequence of a gradual firming in food, fuel and select services categories over recent months," noted Kunal Kundu, India economist at Societe ​Generale.

"At the same time, despite a growing divergence between wholesale and consumer prices following the sharp increase in global commodity and energy costs, the transmission ​from producer prices to retail inflation is likely to ‌remain partial and delayed."

Food price pressures could build further if El Nino, a weather pattern typically associated with weaker monsoon rains in India, disrupts crop ⁠production during the June-September season.

Retail fuel prices also remained elevated after state-owned fuel retailers raised prices four times in May, increasing transportation and logistics costs.

With fears that renewed U.S.-Iran hostilities could once again send oil prices ⁠spiking, some economists said the risks to the inflation outlook remained to the upside.

RBI held its key interest ​rate unchanged at 5.25% last month, in line with expectations. However, a majority of respondents in a survey conducted before the meeting had expected at least one increase by year-end.

The latest Reuters survey showed wholesale price inflation ‌likely eased only marginally to 9.15% in June from 9.68% in May. Wholesale inflation, which assigns a much larger weight to fuel products than ‌the consumer price index, has remained elevated despite headline consumer inflation coming in below expectations in May.

Core inflation, ⁠which excludes volatile food and fuel ‌prices, was expected to be at ​3.95% in June. India does not publish official core inflation data.

(Reporting by Pranoy Krishna; Polling by Renusri K and Susobhan Sarkar; Editing by Vivek Mishra and ‌Kim Coghill)

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