Inflation likely eased to 1.5% in September on base effect, low food prices: Mint poll
Retail inflation likely slipped below the lower bound of the Reserve Bank of India’s 2-6% target band in September, but this may reverse by the January-March quarter.
India's retail inflation is likely to have cooled to 1.5% in September from 2.1% in August, mainly due to the statistical effect of a favourable base and easing of prices in some food items, according to 19 economists polled by Mint. The partial impact of cuts in goods and services (GST) cuts in the latter part of the month may have also helped.
If the economists’ projections prove accurate, this would be the lowest reading since June 2017, when inflation was 1.46%. This would also become the second instance of inflation slipping below the lower bound of the 2-6% target band set by the Reserve Bank of India (RBI).
The official data is scheduled for release on 13 October.
In September 2024, food inflation had jumped to 9.2% from 5.7% a month ago, creating a favourable base this year. This trend is expected to continue in October as well, given that inflation rose further to 10.9% in the same month last year.
“This moderation is due to a favourable base effect from last year’s spike in food prices and the current decline in some food items such as vegetables and pulses," Aditya Vyas, chief economist, STCI Primary Dealer Limited.
As such, economists expect food and beverage inflation to revert to the deflationary zone again in September. In August, after recording deflation for two months, the group had posted a mild rise of 0.05%.
Despite the benign headline inflation trend, economists have noted that core CPI, which excludes volatile items such as food and fuel, could face price pressures."As GST cuts took effect in the latter part of the month, their partial impact could be seen in the inflation data," said Abhishek Upadhyay, economist at ICICI Securities. “On the other hand, gold prices rose sharply over the month in rupee terms, which is expected to limit the inflation decline," Upadhyay added.
The 1.5% expected inflation print in September will take the average inflation for the second quarter to 1.7%, marginally lower than the RBI’s latest projection of 1.8%.
While the effect of the GST cuts is likely to keep inflation range-bound, a sub-2% figure is unlikely to continue beyond December. As per the central bank’s projections, inflation is expected to remain at 1.8% in Q3 but will jump to 4% as the base effect begins to turn unfavourable.
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