India's consumer inflation likely rose to 2.4% in Jan on food prices: Poll

January will be the first month of a new data series based on 2024 prices and will mark the first time since August that inflation returns to the Reserve Bank of India's (RBI) 2% - 6% target band

India's annual consumer inflation rate likely rose for a third consecutive month to 2.4 per cent in January, according to a Reuters poll of economists, as firming food prices and ‍higher gold and silver coincided with fading ​favourable base effects.

January will be the first month of a new data series based on 2024 prices and will mark the first time since August that inflation returns to the Reserve Bank of India's (RBI) 2 per cent - 6 per cent target band.

Complicating matters, the consumer price index (CPI) data, scheduled for release on February 12, will contain new constituent weightings, most notably a sharp cut to food, one of the most volatile CPI components, to roughly 37 per cent from around 46 per cent under the ​previous 2012 series.

MANY ECONOMISTS AWAITING CLARITY ON NEW DATA

The median forecast of 2.4 per cent represents a sharp increase from 1.33 per cent in December under the old series, according to a Reuters poll of 34 economists taken between February 5 and 9.

Estimates ranged widely from 1.40 per cent to 3.10 per cent, and many economists held off on making predictions this month, awaiting more clarity on the new data.

Anubhuti Sahay, head of India Economic Research at Standard Chartered, said apart from an expected boost from unusually low prices in the previous year being removed from the comparison, "both food as well as core inflation are likely to edge up higher".

Core inflation, which excludes volatile food and fuel components and better reflects underlying demand, was expected by analysts to have risen to 4.60 per cent in January, roughly unchanged from December, though India does not publish official core inflation data.

"Gold and silver prices were quite high in January versus December," Sahay said, adding that the food price disinflation that prevailed in the data last year had run its course and food prices were starting ‌to push overall inflation higher again.

Gold prices rose by ​as much as 13 per cent in January, while silver rose around 19 per cent, driven by safe-haven demand away from US dollar-denominated assets. But those prices have since tumbled.

LESS VOLATILITY IN FUTURE

Broadly speaking, inflation is expected to fluctuate less going forward, and most economists say the old CPI weightings, particularly the large food component, made inflation excessively volatile and overly ‍sensitive to food supply shocks.

They also argue it did not adequately reflect how the average Indian household's consumption patterns have changed since 2011-12.

The revised CPI will expand major spending categories from six to 12. The index ‍will ‌track e-commerce and ​digital services for the first time, and will include airfares, telecom plans ‍and selected online services.

Wholesale price index-based inflation (WPI), which has not been rebased, was forecast to rise modestly to an ‍annual ‍1.25 per cent from 0.83 per cent in December, ‌according to the survey.