India is facing a fresh food inflation warning as rising edible oil prices, global supply disruptions and weather risks threaten to put additional pressure on household budgets. Inflation is now expected to average around 5.1%, more than double last year's 2% level, with risks tilted to the upside.

Edible oil has emerged as a major pressure point, with packed sunflower oil prices rising around 18%, palm oil around 14%, soybean oil nearly 12%, groundnut oil over 9% and mustard oil more than 7%.

India imports more than half of the edible oil it consumes, making domestic prices highly sensitive to developments in global markets. The Russia-Ukraine war and disruptions in the Black Sea are adding further uncertainty, as Russia and Ukraine remain major suppliers of sunflower products and other agricultural commodities.

At the same time, El Niño-related weather risks could affect India's monsoon and reduce yields of oilseeds such as soybean, groundnut and mustard. While India's food-grain inventories remain relatively strong and rainfall has improved, rising energy and transport costs, global commodity pressures and weather uncertainty could keep food inflation elevated.

India Food Inflation Warning: Edible Oil Prices Surge, Black Sea War And El Niño Raise Household Cost Risks

India&#39;s inflation cooled to its lowest in at least five years in January as food prices fell following the government&#39;s cash clampdown, but emerging price pressures mean the Reserve Bank of India (RBI) will probably keep interest rates on hold.

Consumer prices rose by an annual 3.17 per cent last month - their slowest pace since January 2012, when the government launched the current index series.

Economists surveyed by Reuters had expected prices to rise by 3.22 per cent from a year earlier, compared with December&#39;s 3.41 percent increase.

Annual retail food inflation eased to 0.53 per cent last month from 1.37 percent in December, helped by lower prices for vegetables and pulses, government data showed on Monday.

In a worry for the central bank, another inflation gauge that excludes volatile food and fuel prices accelerated to around 5.1 per cent in January, after hovering around 4.9 per cent since September.

The RBI&#39;s monetary policy committee reckons sticky core inflation could trigger wide side-effects.

&quot;The RBI is seeing upside risks to inflation and one data point is not going to change their view dramatically,&quot; said Varun Khandelwal, managing director at Bullero Capital.

&quot;Interest rates will remain on hold in the near term.&quot;

Headline inflation has been under 4 per cent since November, well below the RBI&#39;s 5 per cent target for March and medium-term target of 4 per cent.

End of loosening cycle

Still, the RBI last week shocked investors by holding the repo rate at 6.25 per cent and shifting its monetary policy stance to &quot;neutral&quot; from &quot;accommodative&quot;.

The shift comes as Asia&#39;s third-largest economy is still limping back to health after Prime Minister Narendra Modi&#39;s Nov. 8 decision to outlaw old 500- and 1,000- rupee banknotes wiped out 86 per cent of the currency in circulation overnight.

Industrial production fell 0.4 per cent, year on year, in December, government data showed last week.

Even as the economic fallout of demonetisation remains unclear, the RBI is worried about a pick-up in global crude prices along with exchange rate volatility, which it says could push headline inflation above its medium-term target.

Global crude oil prices are up nearly 14 per cent since end-November. The Indian rupee is expected to weaken by nearly 4 percent from its current levels to 69.50 a dollar in 12 months.

Most economists now expect the RBI to hold rates until at least the second half of next year.

&quot;We continue to believe that the RBI will have to tighten

policy sooner than most are anticipating,&quot; Capital Economics said in a flash note.

(Reuters)

But emerging price pressures mean India's central bank will probably keep interest rates on hold

India's inflation cooled to its lowest in at least five years in January as food prices fell following the government's cash clampdown, but emerging price pressures mean the Reserve Bank of India (RBI) will probably keep interest rates on hold. Consumer prices rose by an annual 3.17 per cent last month - their slowest pace since January 2012, when the government launched the current index series. Economists surveyed by Reuters had expected prices to rise by 3.22 per cent from a year earlier, compared with December's 3.41 percent increase. Annual retail food inflation eased to 0.53 per cent last month from 1.37 percent in December, helped by lower prices for vegetables and pulses, government data showed on Monday. In a worry for the central bank, another inflation gauge that excludes volatile food and fuel prices accelerated to around 5.1 per cent in January, after hovering around 4.9 per cent since September. The RBI's monetary policy committee reckons sticky core inflation could trigger wide side-effects. "The RBI is seeing upside risks to inflation and one data point is not going to change their view dramatically," said Varun Khandelwal, managing director at Bullero Capital. "Interest rates will remain on hold in the near term." Headline inflation has been under 4 per cent since November, well below the RBI's 5 per cent target for March and medium-term target of 4 per cent. End of loosening cycle Still, the RBI last week shocked investors by holding the repo rate at 6.25 per cent and shifting its monetary policy stance to "neutral" from "accommodative". The shift comes as Asia's third-largest economy is still limping back to health after Prime Minister Narendra Modi's Nov. 8 decision to outlaw old 500- and 1,000- rupee banknotes wiped out 86 per cent of the currency in circulation overnight. Industrial production fell 0.4 per cent, year on year, in December, government data showed last week. Even as the economic fallout of demonetisation remains unclear, the RBI is worried about a pick-up in global crude prices along with exchange rate volatility, which it says could push headline inflation above its medium-term target. Global crude oil prices are up nearly 14 per cent since end-November. The Indian rupee is expected to weaken by nearly 4 percent from its current levels to 69.50 a dollar in 12 months. Most economists now expect the RBI to hold rates until at least the second half of next year. "We continue to believe that the RBI will have to tighten policy sooner than most are anticipating," Capital Economics said in a flash note. (Reuters)

India's retail inflation lowest in about five years

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India Food Inflation Warning: Edible Oil Prices Surge, Black Sea War And El Niño Raise Household Cost Risks

India's retail inflation lowest in about five years