The Reserve Bank of India is expected to keep policy rates unchanged during upcoming policy review despite moderation in headline inflation, a report by global research firm Dun & Bradstreet has said.
Structural bottlenecks still persist, and as a result, a sustained decline in food articles inflation is expected only in the medium term to long term, the report said.
Moreover, weak rupee and elevated inflation in fuels is likely to exert upward pressures to inflation, it said.
D&B expects the WPI inflation to remain in the range of 5.9 - 6.1 per cent during January 2014.
"The moderation in headline inflation provides some respite to monetary policy management and RBI is expected to keep policy rates unchanged during upcoming policy review," Dun & Bradstreet India Senior Economist Arun Singh said.
The central bank is scheduled to hold its quarterly monetary policy review on January 28.
Wholesale inflation declined to a five-month low of 6.16 per cent in December as food article prices cooled, according to data released yesterday. Retail inflation eased to a three-month low of 9.87 per cent.
Prices as measured by the Wholesale Price Index, gained at the slowest pace since July 2013, when inflation was 5.8 per cent. In November, WPI increased 7.52 per cent, the fastest pace in 14 months.
With inflation easing, industry chambers have pitched for lower interest rates to prop up growth. Industrial output in November contracted 2.1 per cent, the worst performance in six months.
RBI kept key policy rates unchanged last month on expectations that wholesale and retail inflation would ease.
The central bank had increased the key policy rate (repo) twice between September and November to check inflation. The rate is currently 7.75 per cent.
