'June inflation to be 7.82%; steep rate cuts unlikely'

By observing the price movements of different sensitive commodities during the May-June period, the annual estimated inflation is likely to be at 7.82% in June 2012, said brokerage firm ICICI Securities in a research report.

The June inflation numbers are scheduled to be released on Monday.

Annual inflation, as measured by the Wholesale Price Index (WPI), rose to 7.55% in May 2012 (provisional) from 7.23% in April 2012.

"In a scenario where WPI inflation is expected to remain over 7.5% and core inflation likely to hover around 5%, it's fairly unlikely that the RBI will go for steep rate cuts in the forthcoming monetary policy reviews," the report said.

Though there is clamour for rate cuts to fuel expansion, RBI is likely to be "slow and steady" as far as rate cuts are concerned, it said.

In its June 18 policy mid-quarter review, the central bank, citing inflation as the main reason, had kept the interest rate (repo rate) unchanged despite widespread anticipation of at least 0.25% reduction.

"We maintain our stand that RBI in unlikely to cut repo rates more than 75 bps for FY'13, starting with a cut of 25 bps in Q2 FY'13 (Jul-Sept)," ICICI Securities said.

The Reserve Bank is scheduled to announce its quarterly review of monetary policy on July 31.

The month-on-month movement of food articles -- which are the most price sensitive -- witnessed high fluctuation in the May-June period, with agricultural food items (especially fruits and vegetables) governing the trend more than manufactured food products.

"We expect an overall annual increase of 9.08% in food inflation for June 2012 with agricultural food inflation continuing in double-digits (10.72%) and manufactured food inflation once again picking up to 6.10% on the back of a double-digit increase in edible oil prices and sugar prices (7.2%)," ICICI Securities said.

The monsoon rains, from June to September each year, are a key source of water for Indian agricultural India and have been below normal so far.

According to the Indian Meteorological Department, rainfall was deficient by 25% for the country as a whole as of July 8, with 22 out of 36 regions experiencing below-normal rainfalls.

Regionally, north-west India was the worst affected with rainfalls deficient by 43%. Central India and the southern peninsula are also trailing by about 30%.