April 12, 2012 / 2:47 AM / 5 years ago

March inflation likely slowed marginally: Reuters Poll

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A vendor waits for customers at his fruit stall at a market in Kolkata December 8, 2011.Rupak De Chowdhuri/Files

BANGALORE (Reuters) - India's wholesale price inflation rate likely slowed marginally in March as easing price pressures from non-food items offset persistently high food and fuel costs, a Reuters poll showed.

The median consensus from a survey of 30 economists pinned expectations for headline inflation at 6.70 percent for March from a year ago, under the higher-than-expected 6.95 percent recorded in February.

After staying above the 9 percent mark for a year, inflation started cooling last November and hit a 26-month low of 6.55 percent in January, stoking market expectations of a rate cut by the Reserve Bank of India (RBI).

But with global oil prices soaring and Brent oil futures hovering stubbornly near the $120 mark, the risk of climbing inflation has again appeared.

India is heavily dependent on crude oil imports to meet its fuel requirements and, as global oil prices rise, higher transportation costs push up the price of goods.

"It is still suppressed inflation in India (because) the complete global crude oil impact has not been passed to the end consumer," said Arun Singh, at Dun & Bradstreet, who expects inflation to remain elevated for at least another month or two.

An increase to the service tax by the government in its March federal budget may also add to inflationary pressures in the coming months by pushing up production and input costs.

Forecasts in the Reuters survey for March ranged from 6.30 to 7.02 percent, suggesting that, while inflation is not about to go off the central bank's radar, it will remain well below the 9 percent levels.

The RBI is likely to cut its key interest rate for the first time in three years when it meets on April 17, reducing it by 25 basis points to 8.25 percent, a Reuters poll showed on Tuesday.

However, some economists don't see that happening.

"I don't think the RBI will think of cutting interest rates at this point in time. The RBI is purely targeting inflation as of now and inflation, unfortunately, has not shown any tendency of moderation," Singh said.

Reporting by Deepti Govind; Editing by Jonathan Cable and Paul Tait

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