March inflation below 6%, says Mint poll

The data for consumer price inflation for March is due for release on Wednesday.

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.

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Economists expect that food inflation, which accounts for over 40% of the consumer price index (CPI) basket, eased further in March, aiding a drop in the overall inflation. Food inflation fell marginally from 6% in January to 5.95% 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.

“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.”

Headline inflation had risen from 6.07% to 6.95% between February 2022 and March 2022, while food inflation had risen from 5.93% to 7.47% during the same period last year—the base effect Bajoria was referring to.

The RBI’s Monetary Policy Committee (MPC) marginally reduced its inflation projection for FY24 from 5.3% to 5.2% at its latest meeting, based on expectations of a record rabi foodgrain production. However, it said it remains cognizant of any upside risks to food inflation from weather and high uncertainty in crude oil prices.

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

“The MPC is unlikely to see the need to hike further, unless inflation once again moves above or closer to the upper threshold of the mandated band of 2-6%.”