'Inflation will remain elevated in 2021'

Mumbai: Inflation in India may continue to be elevated in 2021, according to a report by ICICI Securities.

The report, however, predicted an ease in inflation by the end of next year.

"We expect inflation to remain elevated in early CY21 due to supply-side constraints. As per our forecasts, CPI inflation is likely to average 6 per cent in Q4FY21 (Q1CY21) and 5.6 per cent in Q1FY22 (Q2CY21). However, we expect inflation to ease and decline to 4.3 per cent towards the end of CY21," it said.

It noted that given the expected inflation trajectory, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) is likely to hold rates till Q2FY22 (Q3CY21), it said, adding that the RBI may continue to take other measures to keep financial conditions easy to support recovery.

ICICI Securities expects the Indian economy to contract 7.5 per cent in FY21 and grow 8.5 per cent in FY22.

It projected that the economy may post positive growth in all quarters of calendar year (CY) 2021, starting with a modest growth of 0.8 per cent YoY in Q4FY21 (Q1CY21) and increasing sharply to 20 per cent in Q1FY22 (Q2CY21) due to low base effect and sequential momentum.