7 days ago
Retail inflation likely fell to a record low of 1.4% in July: Mint poll
India's retail inflation likely fell to a record low in July due to a sustained decline in food inflation, according to a Mint poll.
The inflation measured by the current consumer price index (CPI) is estimated to further fall to 1.4% in July from 2.1% in the previous month, according to the poll of 22 economists. That would mean the lowest since January 2014 under the currentCPI series, with 2012 as the base year.
However, economists said this could mark the lowest point in the declining streak and expect inflation to go up from August onward. So far, the continued statistical effect of a favourable base effect, especially for food, has helped in pulling inflation polled by Mint projected CPI inflation in the range of 1.1-1.8%. The official data is scheduled to be released on 12 August.
'A sharper deflation in the 'food and beverage' category was the main driver (for headline inflation), benefiting from favourable base effects and a sustained month-on-month decline in the prices of pulses," said Dhiraj Nim, economist at ANZ Bank.
Food, which constitutes nearly 40% of the overall inflation basket, has been the primary factor pulling headline inflation down. In June, food inflation was -1.1% and food and beverages inflation was -0.2%. These groups are expected to remain in the deflation zone in July as well.
However, inflation is expected to move upward from August, aligning itself broadly with the Reserve Bank of India's estimates, economists said. 'This is likely to be the trough, with a subsequent upmove broadly in line with the quarterly estimates provided by the Monetary Policy Committee," said Aditi Nayar, chief economist atIcra faster-than-expected decline in inflation, with a nine-month-long declining streak, led to lower projections by the central bank last week. The full-year inflation projection was cut by 60 basis points to 3.1%, while the estimate for the current quarter was lowered by 130 basis points to 2.1%.However, despite the cuts, the rate-setting panel left the policy repo rate unchanged due to the larger-than-expected cut of 50 basis points in June and the possibility of inflation rising above the medium-term aim of 4.0% in the last quarter of the current financial year.'With growth holding firm and inflation expected to rise, we do not expect further rate cuts in this cycle unless downside risks to growth materialize," said CareEdge in a note last week.
