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Crisil foresees CPI rising 60 bps this fiscal to 4 pc


Global analytical company Crisil said on Monday that its research expects headline inflation, measured by the (CPI) to rise 60 basis points (bps) to 4 per cent this fiscal from 3.4 per cent in fiscal 2019.

This base case assumes rising to 3 per cent from an abnormal low of 0.1 per cent. To be sure, this is a largely statistical low-base effect at play.

However, the rise in prices may well remain subdued on a sequential basis for two reasons. One, the has suggested a well-distributed monsoon this year.

Two, global prices are expected to decline in 2019, as projected by the and

The CPI-based gauge has now undershot the (RBI)'s the medium-term target of 4 per cent for two straight fiscals. The sharp decline in fiscal 2019 left analysts scratching their heads.

In a report titled 'Whither ' CRISIL proffered two scenarios for this fiscal. If monsoon plays truant, especially in light of an El Nino event, could surge.

Fuel inflation could follow suit if the current uptick in international crude prices persists. Also, core inflation (the part of and fuel) could strengthen further on account of the government's consumption-oriented policies.

Together, these could push headline inflation up to 5 per cent.

On the other hand, inflation could be lower at 3.5 per cent. That would happen if the remains low for longer, core softens as a result of the lagged impact of economic slack, and government spending remains restrained.

"Our study of the main components of headline inflation and their trends over the past three decades confirms that food has been the main retarding factor," said Dharmakirti Joshi, at CRISIL Ltd.

Core inflation, which is supposed to be a better gauge of demand-side pressures in the economy, has been fairly sticky downwards, irrespective of economic cycles.

Fuel, on the other hand, appears to be the most volatile. But given its low weight in the CPI basket, its direct influence on headline inflation is limited, he said.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, May 13 2019. 18:08 IST