The proposed diesel price pass-through and the likely increase in electricity tariffs and coal prices, would exert some upward pressure on prices, the RBI Macroeconomic Survey said.
The Reserve Bank of India’s Macroeconomic Survey has cautioned that inflation was likely to remain rangebound around current levels in the current fiscal (FY14), but above RBI’s comfort levels. The central bank sees inflation rising again during the second half of this fiscal due to increase in diesel, power and coal prices. This will limit the elbow room for cutting interest rates going forward, the Survey said.
The RBI’s Survey of Professional Forecasters see FY14 wholesale price inflation at 6.5 percent, down from 7.3 percent in FY13.
"Significant suppressed inflation lingers in the system, despite the considerable pass-through that occurred during 2012-13. The proposed diesel price pass-through and the likely increase in electricity tariffs and coal prices, would exert some upward pressure on prices," the Survey said.
RBI expects crude global energy prices to be stable, but is guarded on how much India could benefit from it as well as from falling metal prices.
"Energy supplies are expected to improve, in part by the exploitation of shale gas reserves in the US. Along with soft metal prices, it could contribute significantly to keeping the imported inflation component low during 2013-14, though its ultimate transmission would depend on the extent of correction in the CAD and the consequent rupee exchange rate movements," the RBI Survey said.