Inflation in India, the world’s third-biggest crude oil importer, accelerated in April as the higher global oil and gas prices started to feed through consumer prices.
The annual consumer price index (CPI) is expected to have jumped to 3.8% in April, up from 3.4% in March, a Reuters poll of 46 economists showed on Friday.
Responses in the poll, carried out between May 4 and May 8, ranged from 2.8% to 4.2%. Official data is expected on May 12.
All economists concur that the effects of the higher energy prices have begun to take their toll on consumer prices, even if the average forecast is below the 4% inflation target of India’s central bank.
For more than a year, India’s inflation had stayed below that target, due to lower food and energy prices and favorable comparative bases.
However, the Middle East war and the oil and gas supply shock that followed have already lead to a 40% spike in crude and LNG prices, which begin to weigh on economies in Asia.
India has cut taxes on gasoline and diesel prices to protect consumers, but eventually retail fuel prices would rise if the supply shock persists, analysts say.
“I am assuming that sometime in Q2, rather sooner than later, they will have to hike retail fuel prices because neither the fiscal buffers nor (the) buffers with the OMCs (oil marketing companies) are enough to withstand a prolonged shock,” Dhiraj Nim, an economist at ANZ bank, told Reuters.
Indian firms have also raised the prices of liquefied petroleum gas (LPG)—the primary cooking fuel in the country, after the shock loss of supply from the Middle East.
Indian Oil Co. has hiked the price of liquefied petroleum gas for local industrial users and the price of jet fuel, but only for foreign airlines, while LPG prices for household consumers were kept unchanged.
By Tsvetana Paraskova for Oilprice.com
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