INSUBCONTINENT EXCLUSIVE:
Retail inflation may have gone up to a seven-month high in June on rising food and fuel pricesIndia's retail inflation probably
accelerated to a seven-month high in June on rising food and fuel prices, staying above the Reserve Bank of India's comfort zone for a
second straight month, a Reuters poll showed.While many of India's states have eased restrictions imposed to contain the coronavirus,
supply-side disruptions remain and higher taxes on petroleum products continue to exert upward pressure on inflation.The July 5-7 poll of 37
second month, putting pressure on the RBI to tame prices amid a faltering economic recovery."We believe the biggest driver of June inflation
would be elevated levels of fuel prices engendered by high domestic tax on petroleum products and its pass-through to transportation costs,"
said Kunal Kundu, India economist at Societe Generale.A recovery in global demand has driven a rally in commodity prices, including crude
Analysts expect high fuel prices and rising input costs for companies to keep inflation elevated for some time."I expect India's headline
Price pressures are coming mostly from the supply side, reflecting higher commodity prices and supply chain bottlenecks," said Tuuli
McCully, head of Asia-Pacific economics at Scotiabank."I expect the RBI to tolerate the higher inflation readings through 2021, as there are
no signs of significant demand-driven inflation, and as domestic demand remains soft on the back of virus-related issues."The RBI is facing
the difficult conundrum of balancing growth-inflation dynamics.While the RBI's focus remains on growth, minutes of the June meeting showed
the Monetary Policy Committee would remain watchful on inflation."Needless to say, the Reserve Bank of India is caught between a rock and
hard place, as with higher inflation, monetary policy efforts to revive growth lose a degree of freedom," noted economists from ANZ.The
