September India inflation likely to have exceeded RBI’s 4% target: Reuters poll by Reuters

By Anant Chandak and Rahul Trivedi

BENGALURU (Reuters) – In September, India’s retail inflation likely exceeded the Reserve Bank of India’s (RBI) medium-term target of 4 percent for the first time since July on persistently higher vegetable prices and a stronger base down a year ago, according to Reuters. survey found.

Food products, especially vegetables and other perishables, which account for a significant share of total household expenditure in the country, have seen their prices rise as heavy rains have reduced the availability of essential crops.

A high base last year, which helped reduce inflation in July and August, became a lower base last month, having the opposite effect.

The Oct. 3-9 Reuters poll of 48 economists forecast retail inflation as measured by the consumer price index (CPI) rose to 5.04 percent in September from a year ago, from 3.65 percent in August . Forecasts ranged from 3.60% to 5.40%.

The data will be released on October 14 at 1200 GMT.

“The September reading will bear the brunt of a persistent rise in vegetable prices, especially tomatoes and onions… Even edible oil prices are witnessing a boost due to rising international prices. All these, concurrently, could put upward pressure on headline inflation,” said Dipanwita Mazumdar, economist at Bank of Baroda.

“Furthermore, and in terms of the statistical basis, Q3 does not have an advantage,” she added.

A separate Reuters poll showed inflation would average 4.6 percent this quarter and 4.5 percent this fiscal year, above the central bank’s 4 percent target.

Meanwhile, core inflation, which excludes volatile items such as food and energy, was expected to rise to 3.50 percent in September from 3.30 percent in August, partly due to hikes in telecom tariffs and prices bigger gold.

“We see the persistent weakness in core CPI as a sign of the growing economic downturn, which is also reflected in the rise in auto discounts, and recent gains from corporates (consumer goods) also point to the lack of power to set of prices,” said Rahul Bajoria. , Head of India and ASEAN Economic Research at Bank of America.

Benign core inflation could give the RBI, which left interest rates unchanged on Wednesday, room to start tapering in December. Most major central banks, including the US Federal Reserve, have already begun an easing cycle.

“By the time the RBI meets in December, they will have at least a month of good food price data… (and) the Fed could cut by 75 basis points. In this context, RBI will find room to ease policy. with a very shallow rate cut cycle,” said Gaura Sengupta, chief economist at IDFC Bank.