According to a Reuters survey, inflation in India is expected to rise slightly in March but remains below the RBI's target

BENGALURU (Reuters) – Retail price inflation in India is expected to pick up in March with a slight rise in food prices, but remain below the Reserve Bank of India's medium-term target of 4 percent. according to a Reuters poll.

If the forecast materializes, March will be the eighth consecutive month with inflation below target, leaving the RBI with the opportunity to cut interest rates again this year.

According to the median consensus of more than 40 economists polled by Reuters from April 4 to 8, consumer prices rose by 2.80% in March, compared to 2.57% in February.

Forecasts ranged from 2.43% to 3.10%.

"Total CPI inflation will have remained weak in March, although, as we have suspected, it has risen slightly as food price inflation continues to recover. In particular, the sharp drop in plant inflation seen in recent months seems to have bottomed out, "said Shilan Shah, Indian economist at Capital Economics.

Food prices, which account for almost half of India's CPI basket, fell 0.66% in February, down from 2.24% in January.

Oil – India's main import product – has risen more than 30% this year and is currently trading at around $ 70 a barrel.

"Transportation and utilities – which are clearly influenced by rising oil prices – are (also) driving up overall inflation, on an annual basis," said Prakash Sakpal, an economist specializing in oil prices. 39, Asia at ING.

At its monetary policy meeting on April 4, the RBI cut borrowing costs for the second consecutive time to boost growth, bringing the repo rate to 6.0%.

Fast political easing measures come just weeks before the start of the vote in the national elections, the results of which will be announced in May.

"The argument of growth is not strong enough to soften the policy for the moment. Growth is actually slowing down, but it's not just in India, it's slowing down everywhere. (But) India still has very strong domestic demand, "said Sakpal, of ING.

According to a poll by Reuters last week, economic growth is expected to average 7.2% over the next year.

But if inflation should reach the RBI target this year, just under half of economists polled by Reuters last week predicted another rate cut.

"The RBI will almost certainly follow its cumulative rate cuts of 50 basis points this year with further easing, possibly as early as June," Shah told Capital Economics.

"But with core inflation still high, we believe that a subsequent easing of the policy will prove to be a policy mistake."