Comments
Inflation in India was likely to have eased in August from a 15-month high in July, led by cooling vegetable prices, but held above the upper end of the Reserve Bank of India's 2 per cent-6 per cent target for a second month, a Reuters poll found.
Erratic monsoon rains have ruined some crops of staple food items, prompting the government to subsidise vegetable prices and ban exports of some cereals, providing temporary relief to households.
That was sufficient to bring down headline inflation as food prices account for nearly half of the overall inflation basket. However, rising energy prices are likely to limit the decline.
Also Read | The fine print to today’s inflation
The Sept. 4-7 Reuters poll of 45 economists predicted the consumer price index rose 7.00 per cent in August compared to a year ago, a dip from 7.44 per cent in July. The data will be released on Tuesday.
Forecasts ranged between 6.50 per cent and 7.65 per cent, with almost two-thirds of respondents expecting inflation to be 7.00 per cent or higher.
"The worst is over in terms of the recent spike in vegetables, mainly tomato prices, and much of the headline deceleration we expect to see in the upcoming CPI report should stem from a sharp turnaround in food inflation back down to the single-digit territory," said Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics.
Chanco added the erratic monsoon season "means the risks to inflation will remain skewed to the upside over the next few months."
Also Read | Why inflation may still be a cause for concern despite strong GDP numbers?
While inflation in Asia's third-largest economy was expected to remain above the RBI's upper limit of the target range at least until October, it was forecast to remain higher than the central bank's 4 per cent medium-term target well into 2025.
However, the RBI was not expected to hike its key policy rate anytime soon and instead start cutting in Q2 2024.
"The systemic decline in food inflation, which will be visible in the October data, should give them some amount of comfort to not (make) any repo hikes. In my expectation, they will continue with the pause during the October meeting," said Debopam Chaudhuri, chief economist at Piramal Enterprises.
Also Read | Fight against inflation is not over
The survey also showed wholesale price inflation, the change in producer prices, was likely -0.60 per cent year-on-year in August after a 1.36 per cent decline in the previous month.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.