Even as the CPI inflation for the month of March has slipped sharply to 5.91% as against 6.58% in the previous month, analysts view the supply disruption amid extended lockdown till May 3 may give prices a push.
As per the NSO data released because of the decline in onion prices, food inflation inch lowered to 8.76% in the period under review as against 10.81% in the previous month. Vegetable inflation thus softened to 18.63% from levels of 31.61%.
This is not a clear picture as the real impact shall be seen in April due to lockdown when prices have increased sharply said chief economist at CARE Ratings. "With the lockdown and limited movement of goods because of the absence of labour, trucks, and activity in wholesale markets, there has been a sharp decline in supplies of foodgrain, horticulture, and sugar, which is reflected in high prices in the market. This can push food inflation towards the 10% mark," said Sabnavis.
"However, core inflation will trend downwards as service prices would not change and those products with maximum retail price would not witness a change in prices even with supplies declining."
Also, a decline in crude oil prices is likely to result in reduction of auto fuel price in the near term.
It is the retail inflation or CPI on the basis of which RBI decides its monetary policy stance.