Market Speaks: Higher MSPs, Rising Crude Oil And Populist Spending Key Risks To Inflation In India

Key risks to the retail inflation include higher Minimum Support Prices (MSP) for agricultural items, populist spending in the run-up to the 2019 general elections and strengthening of global crude oil prices, the ASSOCHAM has said in its pre-credit policy review letter to the Reserve Bank of India (RBI). ASSOCHAM Secretary General D S Rawats letter to the RBI Governor, Urjit Patel has said though consumer price index (CPI) showed a decline in retail inflation to 4.44% in February from 5.1% in the previous month, the key risks to the base case CPI inflation forecast include higher Minimum Support Prices (MSPs), global crude oil prices strengthening further and populist spending in the run-up to 2019 general election.

It said the chamber appreciates Reserve Bank of India (RBI) for maintaining status quo in the previous Bi-Monthly Monetary Policy Statement and keeping the policy repo rate under the Liquidity Adjustment Facility (LAF) unchanged at 6%. Consequently, the reverse repo rate under the LAF remained at 5.75%, and the marginal standing facility (MSF) rate and the Bank Rate at 6.25%. Lower inflation in fuel and food helped ease Indias wholesale inflation in February to a seven month low of 2.48%.