India's inflation is likely to average 3.7 per cent in the current fiscal, which is higher than the 2 per cent recorded in the last fiscal, a Dun & Bradstreet research report said. "D&B expects WPI (Wholesale Price Index) inflation to edge up to 3.7 per cent in financial year 2016 up from 2 per cent in fiscal year 2015," Dun & Bradstreet said in a note.
Though declining crude oil prices and lower demand side pressures will help ease inflation, D&B listed factors which may push up WPI inflation. "If actual monsoon turns out to be below normal, not only agricultural growth would be impacted, the resultant increase in food prices would lead to reversal in the downward inflation trajectory," the report said.
Declining for the third consecutive year, WPI inflation during the last fiscal witnessed a growth of 2 per cent against a growth of 7.4 per cent and 6 per cent, respectively, in 2012-13 and 2013-14.
It has gone into the negative since November 2014 mainly on account of cheaper food and fuel products. It was at (-)2.06 per cent in February, (-)0.39 per cent in January, (-)0.50 per cent in December and (-)0.17 per cent in November.
In the monetary policy review in April, the Reserve Bank of India Governor Raghuram Rajan kept interest rates on hold at 7.50 per cent saying he was waiting for banks to pass on the RBI's previous rate cuts, and dismissed bankers' claims that the cost of funds remained too high.
In this connection, Finance Minister Arun Jaitley had, in his landmark budget in February, extended the target deadline for controlling fiscal deficit to three per cent, reasoning that insistence on a timetable to contain the deficit would harm growth prospects.
The targets for the next three years have been set at 3.9 per cent for 2015-16, 3.5 per cent for 2016-17, and 3 per cent for 2017-18.
Jaitley also announced the fait accompli of a monetary policy committee pact earlier with the RBI, which will reduce the governor's power to act alone.
