BENGALURU – India’s retail inflation likely edged up in December on higher food prices but stayed within the Reserve Bank of India’s target range for a fourth consecutive month, according to a Reuters poll of economists.
Food prices, which account for about half of the inflation basket, rose in November and remained elevated last month, largely led by vegetable prices and household staples.
Inflation, measured by the annual change in the consumer price index (CPI), rose to 5.87% in December from 5.55% in November, according to the median view from the Jan. 5-9 Reuters poll of 56 economists.
Forecasts ranged from 5.00% to 6.40%, with around one-third predicting inflation to hit 6.00% – the upper bound of RBI’s 2%-6% target range – or above.
“Food inflation continues to drive headline inflation higher … pulses, spices and vegetables have been firing up inflation and now even fruit prices are joining the fray,” said Kunal Kundu, India economist at Societe Generale.
The RBI had raised the repo rate by a total 250 basis points (bps) since May 2022 in efforts to cool surging inflation, but has left them unchanged since April 2023 as price pressures eased. It is expected to keep the repo rate at 6.50% until at least the second half of this year, a separate Reuters poll found.
The poll showed headline inflation is expected to remain above the medium-term target of 4.00% in coming months, and average 4.8% in the fiscal year starting in April.
“While we don’t expect a sustainable return of headline inflation to 4% even over the next year, the December reading is likely to be the peak going forward,” said Suvodeep Rakshit, senior economist at Kotak Institutional Equities.
