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Jul 17, 2012, 01.12 PM IST
The RBI is expected to retain policy rates in the upcoming policy review, says Ms. Aditi Nayar, Senior Economist, ICRA Ltd.
By Ms. Aditi Nayar, Senior Economist, ICRA Ltd
Initial estimates place headline WPI at 7.25% in June 2012, appreciably lower than our estimate (7.7%).
In 2012, minimum support prices were increased substantially for various oilseeds and pulses, items for which imports are required to fill the domestic demand-supply gap. However, sowing of such items currently remains below trend on account of the sub-par coverage and magnitude of the monsoon rainfall, which may result in a further rise in prices. Overall, a hardening of inflationary expectations on the back of double-digit food inflation for the last four months remains a concern.
Sluggish industrial activity has led to some weakening in the pricing power of producers and core inflation has remained steady at around 5% in recent months despite a weaker Rupee. However, concerns persist on account of the recent rise in the price of the Indian crude oil basket and the weaker-than-normal progress of the monsoon. Accordingly, we expect that the RBI may retain the policy rate in the upcoming policy review.
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