BENGALURU, Sept 9 (Askume) – India’s consumer inflation fell below the Reserve Bank of India’s medium-term target of 4.0 percent for a second consecutive month in August, a Askume survey of economists showed, possibly due to a high base in food prices from the previous year. This resulted in a deceleration in growth.
While food prices, which account for nearly half of inflation, have fallen sharply in the past two months, erratic monsoon rains across India could hurt crop yields and push up prices in the coming months.
The survey of 53 economists conducted from September 4 to 9 predicted consumer price inflation would rise to 3.50% from a year earlier in August, slightly lower than July’s five-year low of 3.54%. Data released at 1200 GMT on September 12 is forecast to range from 3.10% to 4.91%.
Kanika Pasricha, chief economic adviser at Union Bank of India, said, “The high base effect is likely to continue… The improving monsoon in recent weeks has had a positive impact on ground food prices…” Major agricultural states are still grappling with losses.
“We expect the base effect to gradually disappear from September. Risks to food inflation from weather-related issues such as excessive rainfall in September need to be closely monitored.”
Official data released last month showed that vegetable price growth slowed to 6.83% in July , well below the nearly 30% annual rise in each month of the first half of the year.
While expectations of slower overall price growth may provide some relief to RBI policymakers, economists say the recent slowdown is likely to be temporary as a weak rupee will keep inflation elevated in the near term.
Another Askume survey showed inflation averaged 4.2% this quarter and will rise to 4.5%-4.7% in the next few quarters, higher than the central bank’s 4% target.
This suggests that the Reserve Bank of India will proceed cautiously in easing monetary policy. The first rate cut is expected in the next quarter, with most economists predicting it in December.
ANZ economist Dhiraj Nim said: “CPI inflation is likely to be lower than the Reserve Bank of India’s forecast of 4.4% in the third quarter of 2024, which also poses a downside risk to its full-year forecast. The Reserve Bank of India will be optimistic about this and may cut interest rates before December.
Core inflation, which excludes volatile items such as food and energy, was estimated at 3.30% in August, based on the average estimate of a small sample of 15 economists.
The Indian Bureau of Statistics does not release core inflation data.
The survey showed that the inflation rate, based on the wholesale price index, fell from 2.04% in July to 1.85% last month.
