(Reuters) – India’s retail inflation eased to a three-month low in September on the back of softer vegetable prices, but remained above 4%, a target that the country’s central bank has signalled would be key before easing rates. Annual retail inflation rose 5.02% in September from 6.83% the previous month. A Reuters poll of 66 economists had forecast a rate of 5.50%. Retail inflation in June, which was lower than the latest figure, was 4.81%. Food inflation, which accounts for nearly half of the overall consumer price basket, rose 6.56% in September as compared with 9.94% in August.
COMMENTARY:
SUMAN CHOWDHURY, CHIEF ECONOMIST AND HEAD – RESEARCH, ACUITÉ RATINGS & RESEARCH, MUMBAI
“We believe the geo-political risks in the background and the upward pressure on oil prices, apart from the food output risks, will keep the Reserve Bank India’s (RBI) Monetary Policy Committee (MPC) watchful and any reversal of the monetary policy stance is likely to happen only in the next fiscal (year).”
ANITHA RANGAN, ECONOMIST, EQUIRUS, MUMBAI
“A meaningful easing in CPI inflation to 5.02%, though not broad-based, is comforting after the heightened two months of high single digits. The thrust is from fuel and light, which is negative (government’s easing of LPG prices), and vegetables which eased to just 3.4% from the 26% levels of August. Edible oil also contributed to the decline.”
“On the other side, cereals (11%), pulses (16%) and spices (23%) maintain their pace of increase. With uneven monsoon and several states reporting a possibility of a sub-par kharif crop, food inflation outlook remains grim.”
“While 5% is reached, the task downhill to 4% will remain a challenge in the near future.”
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
“Inflation surprised on the positive side and, to some extent, alleviates fears and uncertainties that are typical of food price spikes. Moreover, core inflation also showed a moderating trend in the month with a broad-based slowdown.”
“This is not to say that inflationary risks have vanished and the risk from higher cereal and pulses prices continues to loom.”
“The next CPI print could be sub-5% and we expect average FY24 inflation at 5.3%.”
SUJAN HAJRA, CHIEF ECONOMIST AND EXECUTIVE DIRECTOR, ANAND RATHI SHARES AND STOCK BROKERS, MUMBAI
“The reduction in inflation would reassure the Reserve Bank of India and validate the central bank’s decision to maintain its recent stance of unchanged policy rate. Nonetheless, even at this level, retail inflation remains significantly higher than the RBI’s stated monetary policy target of 4%. This, coupled with the robust performance of industry and infrastructure, indicates that a rate reversal is not imminent.”
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
“The data print aligns with the central bank’s proactive and cautious stance on policy, drawing a balance between easing near-term inflation but heightened global uncertainties.”
YUVIKA SINGHAL, ECONOMIST, QUANTECO RESEARCH, NEW DELHI
“The correction in headline inflation masks the continuing price pressures seen in cereals, pulses and spices within food yet again in September 2023, imparting some degree of downward rigidity.”
“The impact of uneven domestic monsoon on Kharif crop yields, low reservoir levels for Rabi sowing, El Nino possibly weighing on global food output and the more recent Israel-Hamas tensions keeping volatility in crude prices intact, remain under close observation.”
“For now, we hold on to our FY24 CPI forecast of 5.5%, with RBI’s rate-easing cycle likely to commence in the second quarter of FY25.”
UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
“The CPI inflation moderated more than our expectations. The softness has been broad-based across perishables and core inflation. However, higher crude oil prices and persistence of price pressures on cereals and pulses remains to be watched for.”
“Overall we expect the MPC to remain in a prolonged pause mode at least through mid next year, while ensuring short-term rates remain high through tighter liquidity conditions in order to buffer for the adverse global cues.”
GARIMA KAPOOR, ECONOMIST, INSTITUTIONAL EQUITIES, ELARA CAPITAL, MUMBAI
“Going forward, even as perishable food prices continue to ease, we expect non-perishable food prices to remain sticky.”
“Amid continued focus on managing liquidity with the announcement on possible open market operations (OMO) sales… and emphasis on CPI target being 4.0%, we expect the MPC to hold rates throughout this fiscal year. With inflation expected to moderate closer to 4.0% by Q2FY25E, we expect the first repo rate cut by Q2FY25.”
(Reporting by Rama Venkat, Bharath Rajeswaran, Ashish Chandra, Hritam Mukherjee and Navamya Ganesh Acharya; Editing by Sohini Goswami and Eileen Soreng)
