Consumer price inflation in India is likely to fall to 5.3% in December due to a modest rise in food prices, a Reuters poll of economists said, reinforcing expectations of an interest rate cut by the central bank next month amid slowing economic growth.
Food prices, which account for nearly half of the country’s consumer price index (CPI), have kept inflation high in recent months, driven largely by a continued surge in vegetable prices, most of which have risen by double digits over the year.
However, the inflation rate has started to ease thanks to a bumper summer harvest supported by a good monsoon, giving hope for a further decline in the coming months.
A Jan. 6-9 Reuters poll of 43 economists showed inflation as measured by the annual change in the consumer price index (CPI) fell to 5.30% in December from 5.48% in November.
Estimates for the data, which will be released on January 13 at 10:30 GMT, range from 4.50% to 5.60%.
“The slow easing of inflation was due to the delayed correction in vegetable prices due to unseasonal rainfall in October and the upward momentum seen in other food sub-segments such as edible oils, cereals, and a slight decline seen in December,” wrote Kanika Pasricha. chief economic advisor at Union Bank of India (NS:).
Core inflation, which excludes volatile items such as food and energy and is seen as a better gauge of domestic demand, was forecast at 3.70% in December, according to the median estimate from a smaller sample of 17 economists.
India’s statistics agency does not publish core inflation data. Economists expect the figure to be between 3.64% and 3.70% in November.
Although price increases have eased somewhat, inflation is not expected to return to the central bank’s medium-term target of 4% until at least the second half of 2026, according to a separate poll by Reuters.
A majority of economists in a survey taken last month, before Sanjay Malhotra was appointed as Governor of the Reserve Bank of India (NS:) (RBI) to replace Shaktikanta Das, indicated the central bank would cut its key interest rate by 25 basis points to 6.25% at the meeting policy February 5-7.
This is mainly to support the economy, which grew at around 7-8% but slowed to just over 5% in the July-September quarter.
“We continue to expect an RBI rate cut in February with growth likely below the RBI estimate of 6.6%,” Teresa John, deputy head of research and economist at Nirmal Bang Institutional Equities, wrote in a note.
Wholesale price index-based inflation is expected to jump to 2.30% last month from 1.89% in November, the survey also showed.
Source: Reuters
