March inflation seen easing to 4.9%: Mint poll

volatility in food and crude oil prices could add risk to the inflation outlook, keeping the RBI on the fence about monetary policy easing. (Photo: Bloomberg)
volatility in food and crude oil prices could add risk to the inflation outlook, keeping the RBI on the fence about monetary policy easing. (Photo: Bloomberg)

Summary

Core inflation, which excludes food, and fuel and light groups, is expected to continue its downward trajectory and may come in below the 4%-mark for the fourth consecutive month.

India's retail inflation likely eased marginally to 4.9% in March from 5.1% in the previous month, as per the median estimate of 14 economists polled by Mint. Should inflation come as projected, this would be the lowest in five months, driven by a decline in food and fuel prices and a continued easing in core inflation.

The official data is set to be released on Friday.

Among the economists polled by Mint, projections ranged from 4.57% to 5.10%. The projection for March implies the average for January-March would be 5% and the average for 2023-24 will be 5.4%, in line with the Reserve Bank of India’s (RBI) projection given in February.

“The impact of winter seasonality favourably impacting food prices is likely to have been amplified by the cut in LPG and petrol and diesel prices during the month," said Yuvika Singhal, an economist at QuantEco Research.

Ahead of the seven-phase general elections, starting 19 April, prices of petrol and diesel were cut by 2 per litre last month, while prices of food, especially those of vegetables, are expected to moderate in line with seasonal trends.

Additionally, core inflation, which excludes food, and fuel and light groups, is expected to continue its downward trajectory and may come in below the 4% mark for the fourth consecutive month.

However, even with the recent easing, retail inflation is significantly above the central bank’s medium-term aim of 4%. The aim is unlikely to be achieved in the current financial year as well, with the RBI projecting inflation to be 4.5%.

Moreover, volatility in food and crude oil prices could add risk to the inflation outlook, keeping the RBI on the fence about monetary policy easing. In the monetary policy meeting held earlier this month, the monetary policy committee (MPC) chose to keep the policy repo rate unchanged for the seventh consecutive time. “As the path of disinflation needs to be sustained till inflation reaches the 4% target on a durable basis, the MPC decided to keep the policy repo rate unchanged," it said.

Even as the inflation outlook faces risks of uncertainty, resilient economic activity has made a case for a longer pause. As such, economists are divided over the timing of a rate cut, with some expecting it as soon as June, while some others expecting it only in October.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
more

MINT SPECIALS