February Consumer Inflation

February consumer inflation likely edged up for third month:

Consumer inflation probably edged up in February for the third straight month, underscoring the risk of a rebound in inflationary pressures if fuel and food prices pick up.

A plunge in global oil prices and weak consumption have driven down inflation in Asia’s third-largest economy to around 5 percent from double digits in 2013, giving room to the central bank to cut interest rates twice so far this year to spur growth.

Consumer prices likely rose 5.2 percent in February from a year earlier, according to a Reuters’ poll of economists, compared with January’s 5.11 percent, on higher food prices.

India is a long way from worrying about deflation, but under government and investor pressure to revive flagging growth the Reserve Bank of India (RBI) cut policy rates by 25 basis points last week for the second time this year, acknowledging a deficit cutting roadmap set by the government in the 2015/16 budget.

Finance Minister Arun Jaitley, who presented his first full-year budget last month, has set a growth target of 8.5 percent for the 2015/16 financial year beginning April and inflation at 5 percent by the end of March.

India’s economy is projected to expand at 7.4 percent in the current fiscal year, its fastest pace in three years based on new GDP series estimates.

In a report released on Wednesday, the IMF forecast India’s economy will grow by 7.2 percent this year and by 7.5 percent in the next fiscal year.

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