Higher food costs probably pushed inflation up in March

New Delhi: Inflation in India is expected to have edged up on higher food costs in March, snapping a three-month easing trend that will give RBI less scope to support the economy amid fresh signs of slowdown.

Analysts say the risk of less-than-normal monsoon rains this summer will call into question assumptions that the worst is over for Asia's third-largest economy.

Official reports also stated that the wholesale prices probably rose by 5.30 per cent, faster than a 4.68 percent rise in February. Consumer inflation is expected to have quickened to 8.19 percent in March from 8.10 per cent a month ago.

The government will release the data on wholesale prices on Tuesday. India has been battling a prolonged spell of high inflation and low growth. While economic growth has almost halved to below 5 per cent for the past two years, the worst slowdown for the South Asian nation since the 1980s, retail inflation has been averaging around 10 per cent.

A sharper-than-expected cooling in vegetable prices in the past three months had raised hopes of breaking out of that spell. But recent unseasoned hail and heavy rains in parts of the country have damaged crops and driven up food prices again.

"India's economic backdrop is still fragile," said Bill Adams, Senior International Economist at PNC Financial Services Group.A continuing slump in investment and consumer demand resulted in a surprise 1.9 per cent annual contraction in industrial output in February, which compared with analysts' median forecast of 0.9 percent growth. Exports fell for a second straight month in March, widening the trade deficit to a five-month high.