Annual retail inflation rose 5.52 per cent in March, up from 5.03 per cent in February, and above the 5.40 per cent forecast in a Reuters poll of economists, data released by the Ministry of Statistics showed on Monday.
Retail food prices, which account for nearly half of the basket of items used to calculate the inflation rate, increased 4.94 per cent in March on year compared to 3.87 per cent in the previous month.
Transport costs were up nearly 13 per cent on year, after a more-than 8 per cent rise in diesel and petrol prices so far this year, pushed up by higher federal and state taxes.
“Core inflation is expected to remain sticky despite a second wave of COVID-19 infections likely dampening demand,” said Garima Kapoor, an economist at Elara Capital in Mumbai.
Kapoor said companies could face weaker supply-side responses in the face of higher commodity prices.
Core inflation, excluding food and fuel costs, was estimated in the range of 5.9 per cent to 6.0 per cent for the month by three economists, compared with 5.6 per cent-5.9 per cent in February.
India does not release official core inflation data.
Last week, the Reserve Bank of India left the benchmark repo rate unchanged at a record low of 4 per cent, while raising its inflation projection for the April-September period to 5.2 per cent, still within its target range of 2 per cent-6 per cent.
Some analysts have warned that local lockdowns in many states after the second wave of COVID-19 infections could push up prices of many commodities while derailing a nascent economic recovery.
With 168,912 new cases, India accounts for one in six of all new infections globally, although the figure is still well below the U.S. peak of nearly 300,000 new cases on Jan. 8.
India’s economy is limping back to recovery and is projected to grow at around 11 per cent in the current financial year that started on April 1, after an estimated contraction of about 8 per cent in the previous fiscal year. (Additional reporting by Aftab Ahmed and Nidhi Verma in NEW DELHI and Nivedita Bhattacharya in BENGALURU; Editing by Catherine Evans and Hugh Lawson)