Inflation - Agri inflation a key risk : Edelweiss PDF link

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WPI inflation surprised on the upside, growing ~7.2% YoY in April against the expected ~6.7%. As per our re-arranged WPI basket, domestic demand inflation declined further, reaching below long-term average levels. Imported inflation is somewhat sticky as fall in commodities has been negated by weakening INR, while agri-inflation has started to rise again. Part of the jump in food prices is seasonal, but prices rose even after adjusting for seasonality. Going ahead, agri inflation is a dominant concern area; accordingly, monsoon becomes as key variable for inflation trajectory. As of now, there is element of risk that the latter half of monsoon may not be normal due to the developing El-Nino conditions. However, full clarity will emerge only by first half of June, when the Met department releases its detailed monsoon forecast.

Inflation - Agri inflation a key risk

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