CPI Preview: Inflation Expected To Breach 5% In September
After experiencing an exceptionally favourable base effect in July and August, CPI inflation is likely to rise above the 5% mark in September.
(Source: Vijay Sartape for NDTV Profit)
India's retail inflation is likely to see some bump-up after having fallen below the central bank's target for the past two months.
The Consumer Price Index-based inflation is projected to rise to 5.1% in September, according to a median forecast of economists polled by Bloomberg. This is after it came in at 3.65% in August and 3.54% in July, when it was lower than the RBI's target of 4%.
After experiencing an exceptionally favourable base effect in July and August, CPI inflation is likely to rise above the 5% mark in September, as the base effect turns negative, said Kaushik Das, chief India economist at Deutsche bank, who forecasts inflation at 5.09%. This will likely lead to an increase in the CPI index by 0.25% month-on-month in September, versus no change in August, he said. "Assuming our forecast turns out to be correct, CPI inflation will then average 4.1% in July-Sep 2024 vs. 4.9% in April-June," he added.
RBI Governor Shaktikanta Das too said that the CPI print for the month of September is expected to see a big jump due to unfavourable base effects and pickup in food price momentum, caused by the lingering effects of a shortfall in the production of onion, potato and chana dal (gram) in 2023-24, among other factors.
In key vegetables, for the month of August, while prices of onions saw a rise on an annual and sequential basis, tomatoes and potatoes saw a decline, according to data from the Ministry of Consumer Affairs.
While onions were retailing in excess of Rs 50 per kg in September across India on an average, tomatoes were retailing at Rs 46 per kg while potatoes were retailing at 36 per kg.
Food and beverage inflation rose by 5.3% annually in August. On a sequential basis, food & beverages price momentum is likely to increase 0.3% month-on-month in September, after declining by 0.3% in the previous month, according to estimates by Deutsche bank.
For Q2 the RBI projects inflation at 4.1%, with Q3 expected to record a rise at 4.8%, and Q4 expected to be at 4.2%. The moderation in Q4 is expected on the back of a good kharif harvest, ample buffer stocks of cereals and a likely good crop in the ensuing rabi season, it said. Unexpected weather events and worsening of geopolitical conflicts constitute major upside risks to inflation, Governor Das cautioned.
International crude oil prices have become volatile in October. The recent uptick in food and metal prices, as seen in the Food and Agricultural Organisation, and the World Bank price indices for September, if sustained, can add to the upside risks, he said.
