India’s inflation probably eased marginally in June after the new government curbed farm exports, but a growing risk that drought will shrivel summer crops could encourage the central bank to keep interest rates on hold.
Prime Minister Narendra Modi, elected in May amid anger over rising prices, has ordered a crackdown on hoarding to hold down food prices and set limits on the export of staples, such as onions and potatoes.
Presenting his first budget on Thursday, Finance Minister Arun Jaitley vowed to keep the fiscal deficit at 4.1 percent of gross domestic product in this fiscal year, while allocating more funds to ease inflationary pressures.
“The monsoon this year appears more unpredictable,” he told lawmakers, adding that the government would take all steps necessary. Consumer price inflation probably eased to 7.95 percent last month, down from 8.28 percent in May, while wholesale price inflation eased to 5.80 percent, the Reuters poll of economists found.
The government will release the data on wholesale prices on Monday around 0630 GMT. Consumer price data is due at 1200 GMT. Modi faces his first challenge as soaring prices for basic food items, such as milk and potatoes, lifted retail food inflation to 9.4 percent in May, driving wholesale inflation to a five-month high of 6.01 percent.
The government is banking on stocks of food such as rice, wheat and sugar from recent bumper harvests, but has few ways to cap prices of fruits and vegetables that drive food inflation.