Economy
Inflation likely hit a 3-month high in September: Mint poll
Summary
Headline inflation in India likely climbed up again in September on account of normalising base effects and a rise in vegetable prices, undoing the easing streak seen in July and August.
NEW DELHI : India’s retail inflation likely climbed to a three-month high of 5.1% in September, driven by a rise in vegetable prices and and the diminishing impact of a favourable base effect, according to a Mint poll of 20 economists. This reverses the trend of two consecutive months of below 4% inflation.
Economists in the poll estimated September's consumer price index (CPI) inflation to range between 4.7% and 5.3%, with only three expecting inflation to fall below 5%.
The official data is scheduled to be released on 14 October.
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“The acceleration in September was likely driven largely by a reversal of base effects, which had earlier dragged inflation below 4% over July-August," said economists at Barclays in a report dated 8 October.
Inflation has not stayed below 5% for a longer duration since it started rising rapidly in late 2019. According to an analysis by economists at Standard Chartered bank, inflation has failed to stay below 5% for more than three straight months since late 2019.
Despite the expected rise in inflation to above 5%, the average inflation in July-September will still be 4.1%, in line with the RBI’s revised forecast for the quarter. However, in the coming quarters, inflation is expected to print higher.
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“Persistent food inflation has been a concern given the eventual spillover to inflation expectations and headline inflation. The rise in vegetable prices in the first week of October indicates the likelihood of yet another print close to 5% in October," said Anubhuti Sahay, head of India economic research at Standard Chartered bank.
The central bank expects food inflation, which accounts for nearly 40% of the inflation basket, to ease only by the March quarter on better kharif harvest and expectations of a good Rabi season. This will likely keep policymakers cautious even as there are expectations of a rate cut in December, following a change in stance to ‘neutral’ earlier this month.
