India’s retail inflation likely to surpass RBI target in Sep. – Poll

India’s retail inflation is projected to have exceeded the Reserve Bank of India‘s (RBI) 4 per cent medium-term target in September, primarily due to a persistent rise in vegetable prices and a lower year-ago base, according to Reuters poll.

Food items, particularly vegetables and other perishables, have seen a significant increase in prices due to heavy rains affecting crop availability. This has put upward pressure on overall household spending.

Additionally, a higher base from last year, which contributed to lower inflation in July and August, has now become a lower base, resulting in a contrary effect.

A Reuters poll of economists predicts that retail inflation, as measured by the consumer price index (CPI), would jump to 5.04 per cent in September from a year ago, compared to 3.65 per cent in August.

This forecast is based on data from October 3-9 and ranges from 3.60 per cent to 5.40 per cent

Economists attribute the expected inflation surge to the persistent spike in vegetable prices, especially tomatoes and onions, and the rising momentum in edible oil prices due to increased international prices. The statistical base also presents a challenge for the third quarter.

A separate Reuters poll forecasts inflation to average 4.6 per cent this quarter and 4.5 per cent this fiscal year, exceeding the central bank’s target.

Core inflation, excluding volatile items like food and energy, is anticipated to rise to 3.50 per cent in September from 3.30 per cent in August, partly due to telecom tariff hikes and higher gold prices.

Some economists believe that the persistent weakness in core CPI indicates growing economic slack, as evidenced by rising discounts on motor vehicles and recent earnings from fast-moving consumer goods companies.

Attribution: Reuters

Subediting: Y.Yasser