New Delhi, April 7 (IANS) India's headline CPI could rise to between 4.5 and 4.8 per cent from a base case of about 4 per cent, and RBI's April policy is likely to keep rate changes on hold in a cautious tone, a report said on Tuesday. The report from Yes Bank said GDP growth is expected to moderate to about 7 per cent with downside risks if the US-Iran war persists."Growth has remained resilient so far, supported by domestic demand – both private consumption demand and government’s capital expenditure," the bank said.Inflationary risks stem from higher input costs for manufacturers, a possible El Niño that could push up food prices, higher fertiliser costs if passed on to farmers.

Further, a prolonged crisis may also force the government to increase retail prices of petrol and diesel, the bank warned."RBI can remain on a pause to support growth as inflation will not threaten the 6 per cent barrier and will mostly be supply driven. Generally, a supply shock to inflation can be seen through if the HH inflation expectations do not rise significantly," the bank said.Due to heightened uncertainty, the bank said, "there is no burning hurry for the RBI to move to tighten monetary policy, also as USD/INR appears to be now settling into a narrow range."

The report said that the rate cutting cycle is over as inflation trends higher, INR depreciation pressure bites and global central banks signal caution on inflation and rate cycle.“However, a rate hike is also not imminent as India stepped into the current crisis from an advantageous position of low inflation-high growth,” it added.Fiscal policy has moved in to share the burden by absorbing some of the oil price impact by keeping retail prices of petrol and diesel unaffected.

/IANS