Retail inflation seen picking up for first time in 4 months

Bengaluru: India's retail inflation is expected to have picked up slightly in July after cooling in the previous three months, a Reuters poll showed, but likely remained well below the central bank's 4 per cent medium-term target.

Much of the increase is attributed to the return of food inflation. Vegetable prices have risen sharply following erratic monsoon rains.

The consumer price index likely rose 1.87 per cent last month, after dipping to an historic low of 1.54 per cent in June, according to the median forecast of nearly 30 economists.

But forecasts ranged from 0.90 per cent to 3.60 per cent. The data is expected to be released on August 14 at 1200 GMT.

"Vegetables like tomatoes and onions caused a bit of disruption with price rises driven by uneven monsoon rains. However, the new season will start by September and the arrival of new stocks should ease some of the recent pressure," said Tushar Arora, senior economist at HDFC Bank.

Food and beverages account for nearly half of the consumer price index basket and are largely dependent on the monsoons - which deliver about 70 per cent of India's annual precipitation.

Uneven distribution of rainfall so far this year could lead to lower grain production, which would increase imports of edible oils, pulses and sugar, pushing prices up. It could also limit exports of cotton, rice and feed ingredients.

Forecasters also expected the wholesale price index rose 1.3 per cent in July, after four months of easing inflation. In June, the WPI rose 0.9 per cent.

The Reserve Bank of India (RBI) cut interest rates last week - making it the first Asian central bank to ease this year - but maintained its neutral stance and said inflation could accelerate.

"The (next) RBI rate decision will depend on the August inflation figure, which comes before the October policy meeting," said Nikhil Gupta, economist at Motilal Oswal Financial Services.