Prices of crude oil in the market may have a serious impact on retail inflation. The inflation is now rising after reaching a minimum of 1.46% in June and considering this, the Reserve Bank can keep the policy rate at least for some time in 2018.
In addition to the oil price, the recommendations of the seventh pay commission, including the house rent, can be fully compounded by the pressure on prices.
Industry experts and economists believe that retail inflation may average 4 to 4.5% in next year. In the year 2017 it was between 1.46 to 4.88 %.
Retail inflation has a direct impact on the general public and the Reserve Bank makes it the mainstay in monetary policy review. Retail inflation based on Consumer Price Index (CPI) rose to a minimum of 1.46% in June, which was higher at 8.88% in November.
Considering the strengthening of oil prices and the uncertainty of kharif crop production, the Reserve Bank has also increased the inflation forecast from 4.2 to 4.6 % till March 2018. If inflation is based on wholesale price index, then it is expected to be within the range of 0.90 to 6.55% in 2017.
The wholesale inflation rate remained between 5.25 to 6.55% in the first three months and between 0.90 to 1.88 % in the middle of the year. It was 3.93 % in October. With this trend of inflation, the government got some relief this year. However, next year owing to the import bill is expected to increase from the purchase of crude oil.
It had been affirmed that the prices of vegetables and edible oil were not low in this year. If this situation continues and the prices of food items continue to rise, there will be simultaneous rise in inflation. Apart from this, prices of crude oil can also be under pressure.