Rama Krishna Sangem
Here is some good news to new RBI Governor Sanjay Malhotra and all those who wait for a rate cut in February first week. India retail inflation likely fell to 5.53 per cent in November after breaching the central bank’s 6 per cent upper tolerance band as the arrival of fresh produce to markets moderated soaring vegetable prices, a Reuters poll of economists found.
The Reserve Bank of India held interest rates steady last week, as predicted in a separate Reuters poll, citing price pressures, despite news of a surprise sharp slowdown in economic growth last quarter.
Inflation unexpectedly rose to a 14-month high of 6.21 per cent in October, driven by the fastest vegetable price rises in nearly four years. An additional import duty imposed on edible oils in September has also increased price pressures significantly.
But inflation as measured by the annual change in the consumer price index (CPI) likely slipped to 5.53 per cent last month, according to the median estimate in a Dec 4-9 Reuters survey of 56 economists.
Data to come out Dec 12
Forecasts for the data, set to be released on Dec. 12 at 1030 GMT, ranged from 5.00 per cent to 6.10 per cent. Only two economists expected inflation to be at or above the top end of the RBI’s 2 per cent to 6 per cent tolerance band.
A fall in inflation will be welcomed by households in the world’s most populous country, where food takes up a large chunk of budgets.
“Vegetable prices are showing first signs of moderation and edible oil prices are also stabilizing after the duty hikes,” wrote Rahul Bajoria, head of India and ASEAN economic research at BofA Securities, in a recent note.
Core inflation, which excludes volatile items such as food and energy and is seen as a better gauge of domestic demand, was forecast to be steady at 3.70 per cent in November, according to the median estimate from a smaller sample of 29 economists surveyed.
“Overall, India’s high headline inflation remains narrowly based on vegetable prices, excluding which, inflation is below 4 per cent,” said Dhiraj Nim, economist at ANZ.
