India's inflation could be below 4%

India's consumer inflation in February likely fell below the Reserve Bank of India's (RBI) medium-term target of 4% for the first time in six months.

Consumer inflation in India in February is likely to decline thanks to cooling food prices. Illustrative photo

India's consumer inflation likely fell below the Reserve Bank of India's (RBI) medium-term target of 4% in February for the first time in six months, helped by easing food prices, a Reuters poll showed, reinforcing expectations of an interest rate cut.

In recent months, with abundant winter vegetable supplies, food prices, which account for nearly half of the inflation basket, have decelerated significantly. This is a positive sign after the supply disruptions last year, when erratic monsoons and intense heat caused food prices to skyrocket, with many items seeing double-digit increases.

A Reuters poll of 45 economists , conducted from March 4 to 10, forecast inflation falling to 3.98% in February, from 4.31% in January.

Forecasts for the data due on March 12 ranged from 3.40% to 4.65%, with nearly 70% of respondents predicting inflation to be at or below the RBI’s medium-term target. Only five predicted inflation to exceed January’s level.

With inflation within the RBI's target range of 2-6%, economists say the central bank could cut interest rates again in April to support slowing economic growth, after cutting rates by 0.25 percentage points in February.

Another Reuters poll showed this rate cut cycle will be short and not too deep.

However, the India Meteorological Department warned that summer and heatwaves could arrive early, raising concerns that inflation could rise again as winter food supplies dwindle.

“We expect vegetable prices to start rising again from March due to the impact of heat waves and weather disruptions on crops,” said Rahul Bajoria, India & ASEAN economist at Bank of America.

His team forecasts overall consumer inflation to reach 4.8% in the current financial year but ease to 4.1% in the next financial year, with risks balanced between lower commodity prices and a weaker rupee.

The forecast is in line with a Reuters poll last month, which forecast inflation at 4.8% and 4.3%, respectively.

Core inflation, which excludes volatile food and energy prices, is forecast to edge up slightly to 3.82% in February from 3.70% in January.

Inflation based on the wholesale price index is forecast to have risen to 2.36% in February, from 2.31% in January, according to a Reuters poll.

Source: https://congthuong.vn/lam-phat-an-do-co-the-duoi-muc-4-377736.html