ADB raises inflation forecast for India to 5% for current fiscal year

New Delhi: The Asian Development Bank (ADB) has raised its inflation forecast for India to 5% from 4.6% for the current fiscal year, blaming price rises crude oil, the depreciation of the rupee and the increase in minimum support prices. The ADB announced on Thursday that the upward revision "responds to rising oil prices, the sharp depreciation of the Indian rupee in recent months and the generous increases announced on July 4 at least". summer crop support prices, through which the government intervenes in the markets to protect agricultural producers from any sharp drop in agricultural prices.

The International Monetary Fund on Monday lowered its growth forecast for India by 10 basis points rise in oil prices and sp The Indian Reserve Bank (RBI) increased its interest rates due to higher than expected inflation.

However, the ADB believes that India should reach its previous growth forecast of 7.3% in 2018-19 and 7.6% in The strengthening of banks stimulates private investment and the benefits of the goods and services tax (GST), while maintaining that increases in oil prices pose a negative risk to growth. 2017-18, the Indian economy grew by 6.7%.

The ADB said that growth accelerated in Q4 2017-18, GDP growth reaching 7%. , 7%, the highest rate since the first quarter of 2016- 17. He said in the first half of the year. fiscal year 2019, the growth rate should benefit from a weak base.

"The other main drivers of growth are a slight rise in public consumption, which is typical before the elections, and a recovery in exports following the shortage of working capital linked to a new tax on goods and services. Private consumption is expected to grow at a steady pace, as the disruption caused by demonetization in 2016 will disappear, capacity utilization rates are at their highest level in 4 years and should encourage businesses to invest ", said the Manila-based bank in 19659003. In June, wholesale price inflation in India reached 5.77% Retail inflation accelerated to a 5% peak in five months. Many badysts do not rule out RBI taking further rate hikes next month in its policy review on Aug. 1. RBI raised the repo rate by 25 basis points on June 6 to 6.25% – the first rate hike in over four years – citing higher risks of inflation.

Although RBI has slightly revised its inflation projection to 4.85% for April. -September of 4.9% projected previously, it has revised upward its inflation forecast for the period October-March to 4.7% against 4.4% estimated earlier, "with risks oriented to the rise."

The survey of household inflation expectations for May among 5,289 households showed that 82.3% of them predict an acceleration of inflation in the next three months, compared to 80.2% in March. 91.1% of households now forecast an acceleration of inflation compared to 90.8% a year ago.

Fears of a global tightening of supply following failures in Libya and Venezuela have led to a nearly 5% rise in crude oil prices since April. when ADB released his ADO. Oil prices rose $ 73 a barrel Thursday, supported by official data showing that US inventories of gasoline, diesel and fuel oil dropped unexpectedly last week.

The 2017-18 Economic Survey presented on Jan. 29 had estimated that each $ 10 per barrel increase in oil prices reduces economic growth by 0.2-0.3 percentage points, increases the inflation of about 1.7 percentage points and increases the current account deficit from about 9 to 10 billion dollars.

paced earlier than expected, the nationwide rainfall deficit in the season was 4% until Monday. Although the weather department of India has forecast a normal monsoon this year, its distribution and intensity in July will be crucial for kharif production, which will have an impact on food inflation.

After a modest rise over the past four years According to India Ratings and Research, rising dairy prices between crops on July 4 should add 70 basis points to retail price inflation.