Falling crude oil prices and better rainfall in recent weeks may have tempered inflation risks in India, but don't expect the country's central bank to ease monetary policy anytime soon, say economists.
The Reserve Bank of India (RBI) is widely expected to keep its benchmark repo rate unchanged at 8.0 percent when it meets on September 30, according to a Reuters poll.
"We expect rates to be kept unchanged and for RBI to maintain a cautious outlook on inflation despite an expected undershoot in near-term inflation," said Devika Mehndiratta, senior economist, South Asia & ASEAN at ANZ.
The RBI may find it challenging to bring down the consumer price index (CPI) to 6 percent by January 2016, said Mehndiratta, as faster economic growth could revive price pressures.
Asia's third largest economy grew 5.7 percent on year in the June quarter, its quickest pace in two-and-a-half years. As a result, the central bank is likely to monitor price pressures before committing to easing monetary conditions. ANZ forecasts the first rate cut to be delivered in the second quarter of 2015.
To be sure, while authorities are keeping an eagle eye on prices, data have suggested a mixed inflation picture. India's wholesale price index (WPI) rose 3.74 percent on-year in August, its slowest pace since October 2009, helped by the high base effect of last year and the 15 percent fall in crude oil prices in the past three months.