Informist Poll
August CPI inflation seen 3.6%, largely unchanged from July
This story was originally published at 20:40 IST on 9 September 2024
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By Shubham Rana
NEW DELHI – India's headline CPI inflation is expected to have stayed largely unchanged in August from July’s 59-month low of 3.54%, thanks to a high base and weaker month-on-month rise in food prices.
According to the median of estimates of 20 economists, CPI inflation is seen at 3.6% in August. This would be the second consecutive month of headline retail inflation staying below the Reserve Bank of India's target of 4?ter having spent nearly five years above it.
Headline inflation was 6.83% in August 2023.
The National Statistical Office is scheduled to release CPI inflation data for August at 1730 IST on Thursday.
FOOD PRICE MOMENTUM COOLING
While inflation moderated sharply in July to below 4% for the first time since September 2019, the general index of the CPI rose month-on-month because of a rise in food prices, particularly those of vegetables. This, however, is not expected to be the case in August.
"Moderation in food inflation pressures was broad-based spread over vegetables, pulses and cereals, and edible oils," said Gaura Sen Gupta, chief economist at IDFC FIRST Bank.
According to data from the Department of Consumer Affairs, prices of tomato fell 23.3% on month in August, compared to a 55.5% rise in July. Onion prices, which rose 20.3% sequentially in July, were up just 3.0% in August from the previous month.
Potato prices increased 1.5% in August as against a 15.9% month-on-month rise the previous month.
"On-the-ground food prices have seen a salutary effect from recovery in monsoon in recent weeks with some improvement in distribution as well, even as key agri states are still reeling under deficit," Kanika Pasricha, chief economic advisor, Union Bank of India, said in a note.
"Going forward, food inflation is further expected to come down in coming months as the monsoon has progressed well. However, risks to food inflation from weather-related issues like sharply-higher-than-required rains in September need close watch," she added.
LOW CORE PRESSURES
Core inflation, which strips prices of food and fuel items, is expected to have remained close to July’s print of 3.4%, economists said.
In July, core inflation rose to 3.4% from June's record low of 3.1% on the back of an increase in telecom tariffs and gold prices.
The Reserve Bank of India's Monetary Policy Committee had said in August that there were "indications of core inflation bottoming out".
POLICY VIEW
Even if inflation stays below 4% in August, it is unlikely to push the central bank to lower the repo rate, which has been left unchanged at 6.50% since February 2023.
The MPC reiterated last month that it is "resolute in its commitment to aligning inflation to the 4% target on a durable basis". As such, with headline inflation expected to rise above 4% from September once the favourable base effect fades, a rate cut is unlikely at next month's meeting.
"Overall, we expect inflation to evolve broadly in line with the RBI's trajectory. This suggests that the room for a rate cut is likely to open only in December," according to Bank of Baroda Economist Aditi Gupta.
The central bank expects inflation to rise to 4.7% in Oct-Dec from 4.4% in Jul-Sep. The most forward-looking forecast of the RBI pegs inflation in Apr-Jun next year at 4.4%.
The following is a summary of the poll on CPI inflation in August:
Range of expectations: 3.1-4.0%
Mean: 3.6%
Median: 3.6%
Mode: 4.0%
|
ORGANISATION |
CPI INFLATION ESTIMATE |
|
Nomura |
3.1% |
| ICRA | 3.2% |
|
ICICI Securities Primary Dealership |
3.3% |
|
Union Bank of India |
3.3% |
|
ICICI Bank |
3.38% |
|
QuantEco Research |
3.38% |
|
Sunidhi Securities |
3.39% |
|
IDFC FIRST Bank |
3.4% |
|
HDFC Bank |
3.5% |
| Motilal Oswal Financial Services |
3.54% |
|
Kotak Mahindra Bank |
3.58% |
|
Acuite Ratings and Research Ltd |
3.6% |
|
ANZ Banking Group |
3.64% |
|
Capital Economics |
3.7% |
|
CareEdge Ratings |
3.7% |
|
RBL Bank |
3.71% |
|
Nirmal Bang Institutional Equities |
3.75% |
|
Societe Generale |
3.9% |
|
Bank of Baroda |
4.0% |
|
India Ratings and Research |
4.0% |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Deepshikha Bhardwaj
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