India’s consumer inflation is predicted to have declined to 5.80% in March, as per the recent Reuters poll of economists. The drop in inflation rate can be attributed to the softer food price rises in the country. If this projection is realized, it will be the first time this year that the inflation rate has fallen below the Reserve Bank of India’s upper tolerance limit of 6.00%.
The consumer inflation data for March is scheduled to be released on April 12 at 1200 GMT. This announcement comes just a week after the Reserve Bank of India (RBI) surprised the markets and analysts by maintaining its key interest rate at 6.50%, contrary to the expectation of a 25 basis point rise.
Falling vegetable prices are expected to have contributed to the moderation of food inflation, which accounts for almost half of the overall consumer price basket in India. However, this moderation is partially offset by surging cereal prices.
As per the median view of 39 economists polled by Reuters between April 3-6, the inflation rate in India, measured by the annual change in the consumer price index (CPI), is expected to have declined to 5.80% in March from 6.44% in February.
If the anticipated decline in the inflation rate becomes a reality, it would be the lone month in the current year where the inflation rate in India falls beneath the upper tolerance limit of 6.00% imposed by the Reserve Bank of India.
According to the April 3-6 Reuters poll of 39 economists, the projections for the inflation rate varied between 5.40% and 6.40%, with 25% of the survey respondents predicting inflation above 6.00%. The inflation rate stood at 6.52% in January and remained above 6.00% for most of the previous year.
According to Sujit Kumar, an economist at Union Bank of India, the decrease in inflation was probably caused by lower prices of vegetables and fuel, as well as a strong base effect from the previous year.
As a result of the recent surge of over 20% in oil prices, it is expected that fuel prices will once again cause inflation to rise.
“We think the RBI’s stance is somewhat risky, with inflation having proven far stickier than the Bank should be comfortable with,” noted Mitul Kotecha, head of emerging markets strategy at TD Securities.
A separate Reuters poll indicated that inflation was projected to average 5.2% in the current fiscal year, which is well above the medium-term target of 4.0%.