Author: Vivek Mishra
BENGALURU (Reuters) – India’s consumer price inflation likely fell to 5.3% in December due to a slowdown in food price growth, a Reuters poll of economists showed, boosting expectations that the central bank will cut interest rates next month amid slowing economic growth.
Food prices, which make up almost half of the country’s consumer price index (CPI) basket, have kept inflation high in recent months, driven largely by a steady rise in vegetable prices, which have risen mostly by double digits over the year.
However, they have started to taper off thanks to an excellent harvest of summer crops supported by favorable monsoons, giving hope for further moderation in the coming months.
A Jan. 6-9 Reuters poll of 43 economists showed inflation, as measured by the annual change in the consumer price index (CPI), fell to 5.30% in December from 5.48% in November.
Estimates of the data, to be released on January 13 at 10:30 GMT, ranged from 4.50% to 5.60%.
“The slow pace of easing in inflation is attributed to a delayed correction in vegetable prices in view of unseasonal rains in October and growth momentum seen in other food sub-segments such as edible oils, grains, with some cooling seen in December,” wrote Kanika Pasricha, chief economic advisor in Union Bank of India (NS:).
Core inflation, which excludes volatile items such as food and energy and is considered a better indicator of domestic demand, was forecast to come in at 3.70% in December, according to the median estimate of a smaller sample of 17 economists.
The Indian Bureau of Statistics does not publish data on core inflation. Economists estimate that in November it was between 3.64% and 3.70%.
Although price growth has slowed modestly, inflation is not expected to return to the central bank’s medium-term target of 4% until at least the second half of 2026, a separate Reuters poll showed.
A majority of economists in a poll last month, before Sanjay Malhotra was named Reserve Bank of India (NS:) (RBI) governor to replace Shaktikanta Das, said the central bank would cut its key interest rate by 25 basis points to 6 .25% at the February 5-7 policy meeting.
This would mainly be to support the economy, which was growing at around 7-8% but slowed to just over 5% in the July-September quarter.
“We still expect a rate cut from the RBI in February with growth likely to exceed the RBI’s 6.6% forecast,” wrote Teresa John, deputy head of research and economist at Nirmal Bang Institutional Equities.
Inflation based on the wholesale price index was expected to jump to 2.30% last month from 1.89% in November, the survey also showed.
