Informist, Monday, Jul 10, 2023
By Priyansh Verma
NEW DELHI - India's retail inflation rate, based on the Consumer Price Index, likely rose for the first time in five months in June, mainly due to a sharp rise in prices of key vegetables, particularly tomato. According to the median of an Informist poll of 22 economists, CPI inflation is seen rising to 4.6% in June from a 25-month low of 4.25% in May.
The CPI inflation rate was 7.01% in June last year.
At 4.6%, retail inflation in Apr-Jun will average 4.5%, 10 basis points below the Reserve Bank of India's projection of 4.6% for the quarter.
A back-of-the envelope calculation shows at 4.6%, the overall index will rise 0.8-0.9% month-on-month. A sequential rise of 0.8-0.9% will be the highest in over a year.
The National Statistical Office is scheduled to release the inflation data for June at 1730 IST on Wednesday.
According to data from the consumer affairs department, prices of tomato jumped 38.0% month-on-month in June, and that of potato and onion increased by 5.7% and 4.2%.
"While vegetable prices rise seasonally in summer, the current increase – driven by pests, hot weather and lower output – is abnormal," Nomura said in a report.
The surge in tomato prices is unlikely to subside in the short run, according to market participants. Tomatoes are harvested in summer and supplies hit the market in June and July. As crops were affected, supply of the vegetable has fallen at present, traders said.
According to consumer affairs department data, prices of pulses, on an average, increased 1.9% month-on-month in June, while edible oil prices declined 2.2%. Prices of wheat and rice rose by 1.4% and 1.3%, respectively, month-on-month in June.
Economists expect CPI core inflation, which excludes food and fuel items, to increase slightly in June.
"Sequentially, we expect to see continued price rises for clothing and footwear, health and education, household goods and recreation," said Rahul Bajoria, managing director and head of emerging markets Asia (ex-China) economics, Barclays. Barclays expects core inflation to rise to 5.2% in June from a three-year low of 5.0% in May.
The vegetable price-driven surge in the headline CPI print could increase the policy trade-offs and risks delaying the first cut in the policy repo rate, Nomura said.
Following is a summary of the details and estimates of respondents for CPI inflation in June:
|
Organisation |
Forecast for June CPI inflation (in %) |
|
Societe Generale |
4.1% |
|
Barclays |
4.3% |
|
CRISIL |
4.4% |
|
QuantEco Research |
4.4% |
|
Deutsche Bank |
4.49% |
|
DBS Bank |
4.5% |
|
HDFC Bank |
4.5% |
|
ICICI Securities Primary Dealership |
4.5% |
|
Nomura |
4.5% |
|
STCI Primary Dealer |
4.5% |
|
Sunidhi Securities |
4.58% |
|
Bank of Baroda |
4.6% |
|
IDFC FIRST Bank |
4.6% |
|
IndusInd Bank |
4.61% |
|
ICICI Bank |
4.63% |
|
YES Bank |
4.63% |
|
Care Edge |
4.7% |
|
Emkay Financial Services |
4.7% |
|
Equirus Group |
4.7% |
|
ICRA |
4.7% |
|
Motilal Oswal Financial Services |
4.7% |
|
Standard Chartered Bank |
4.8% |
End
Edited by Vandana Hingorani
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