India’s Retail Inflation Likely To Cross RBI’s Target Of 4% In September: Reuters Poll

Mumbai: India’s retail inflation in September is predicted to be 5.04%, compared to the 4% target set by the Reserve Bank of India (RBI). The retail inflation in August was 3.5%. According to a poll by Reuters, the increase in retail inflation has been attributed to rising vegetable prices. 

Experts believe the rise in retail inflation will make RBI consider a cut in interest rate in the next Monetary Policy meeting in December. Core inflation has also witnessed a slight increase in September. 

Food items such as vegetables and fruits saw an increase in prices as heavy rains impacted their production and availability in the market. 

Last year’s high inflation, which helped reduce this July and August’s inflation figures, turned into a lower base in September, causing inflation to rise instead.

Reuters conducted a poll from October 3 to 9 with 48 economists, which predicted that retail inflation, as measured by the Consumer Price Index (CPI), would grow to 5.04% in September. Forecasts by economists ranged between 3.60% to 5.04%.

“September’s reading will bear the brunt of a persistent spike in vegetable prices, especially tomatoes and onions …. Even edible oil prices are witnessing momentum due to an increase in international prices. All these concomitantly might put upside pressure on headline inflation,” Reuters quoted Dipanwita Mazumdar, an economist at the Bank of Baroda.

A separate Reuters poll predicted the retail inflation to be 4.6% this quarter and 4.5% in the current fiscal year. 

The core inflation that does not consider volatile items such as food and energy is predicted to rise to 3.50% from 3.3% in August due to higher gold prices and telecom tariffs. 

“We see the persistent weakness in core CPI as a sign of growing economic slack, which is also mirrored in rising discounts on motor vehicles, and recent earnings from (fast moving consumer goods) companies also indicate lack of pricing power,” said Rahul Bajoria, head of India and ASEAN economic research at Bank of America.