CPI data due tomorrow; here’s what to expect

A Mint poll of 20 economist has predicted that Retail inflation in India likely eased to a 15-month low of 5.7 percent in March after breaching the central bank’s upper tolerance limit of 6 percent in January and February. 

A poll by Reuters found that India’s consumer inflation likely eased in March to 5.80 percent thanks to softer food price rises, dipping below the Reserve Bank of India’s upper tolerance limit for the first time this year. Food inflation, which accounts for nearly half of the overall consumer price basket, is expected to have moderated due to falling vegetable prices, offset in part by surging cereal prices.

Food inflation fell marginally from 6 percent in January to 5.95 percent in February, and was one of the primary factors of high inflation between December 2022 and February 2023, as per the latest statement by the monetary policy committee.

The estimates in the poll ranged from 5.4% to 6.4%, but barring one economist who predicted the figure at 6.4%, all others gave a number below 6%. If the median forecast comes true, inflation will have fallen within the Reserve Bank of India’s (RBI) inflation target range for only the third time in the 12 months of 2022-23.

“Amid moderating food prices, we expect a high base pushing March CPI down to 5.7% year-on-year, with most of the moderation felt in food inflation,” noted Rahul Bajoria, economist at Barclays. “On a year-on-year basis, we estimate that food inflation eased to 4.8%, due to a high base.”

“Inflation is likely to remain at sub-5% in April-June, albeit driven by favourable base effects,” said Standard Chartered Bank economists.

Sujit Kumar, economist at Union Bank of India, said vegetables and fuel likely pulled inflation down, as well as the fact the base from a year ago was particularly strong.

But with oil prices having surged more than 20% from their recent lows, fuel is likely to push inflation back up again.

Mitul Kotecha, head of emerging markets strategy at TD Securities said, “We think the RBI’s stance is somewhat risky, with inflation having proven far stickier than the Bank should be comfortable with.”

The United Nations food agency’s world price index fell in March for a 12th consecutive month, and is now down 20.5 percent from a record high hit one year ago following Russia’s invasion of Ukraine

Meanwhile, China’s consumer price inflation fell below one percent in March, official figures showed Tuesday, a sign of weak demand as the world’s second largest economy tries to recover from its pandemic-driven slump. The March consumer price index (CPI) — the main gauge of inflation — came in at 0.7 percent, down from the one percent seen a month earlier, according to the country’s National Bureau of Statistics (NBS).

(With inputs from agencies)