To worsen matters, a sharp rise in fuel prices is likely from March as the state elections conclude unless the government cuts excise duties further.

Nomura expects retail inflation to average 5.8% year-on-year in 2022-2023, higher than the RBI’s forecast of 4.5%. “Higher commodity prices, an increase in fuel pump prices after state elections, services’ reopening pressures, and elevated household inflation expectations are upside risks to inflation,” it said.

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