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Rising India food costs likely snapped inflation downturn in May: Report

The Reuters poll of 50 economists conducted June 5-10 predicted consumer price inflation (CPI) is expected to have picked up to 4.89 per cent last month from April's 4.83 per cent.

RBI, Reserve Bank of India

Poll suggests that the Reserve Bank of India is still several months away from cutting interest rates. (File photo)

Reuters

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By Milounee Purohit and Vivek Mishra
BENGALURU: India consumer inflation likely snapped a four-month downward trend in May due to rapidly rising food costs, according to economists polled by Reuters, suggesting the Reserve Bank of India is still several months away from cutting interest rates.
The Reuters poll of 50 economists conducted June 5-10 predicted consumer price inflation (CPI) is expected to have picked up to 4.89 per cent last month from April's 4.83 per cent. Forecasts for the data, scheduled to be released on June 12 at 1200 GMT, ranged from 4.30 per cent to 5.20 per cent.
"We expect a further pickup in food inflation, led by higher prices of perishables such as fruits and vegetables amidst intense heatwaves in the country. Pulses also remain fairly elevated, lending an upward bias to the overall inflation print," Aditi Gupta, an economist at Bank of Baroda, wrote in a note.
Food prices, constituting almost half of the CPI basket, have outpaced the rate of inflation since June 2023, as erratic rainfall and severe heat waves have reduced the supply of vegetables and other perishables.
The RBI kept its key interest rate unchanged at 6.50 per cent last week, raised its economic growth outlook for the current year but kept its inflation view unchanged, though it warned of persistent price pressures on food.
Inflation was not expected to fall below the central bank's 4.0 per cent medium-term target anytime soon, averaging 4.5 per cent this fiscal year and next, a separate Reuters survey showed.
The poll also estimated core inflation, which strips out volatile food and energy prices, was likely to be 3.20 per cent in May, according to the median forecast of 21 economists. The Indian government does not release core inflation figures.
"The RBI has very little to worry about, especially on the core inflation front. We continue to maintain that benign core inflation is a clear indication of weak aggregate domestic demand," wrote Kunal Kundu, India economist at Societe Generale.
"We expect the RBI to announce its first rate cut move during Q4 2024, potentially in October. Nevertheless, we do not rule out the possibility of the decision being pushed further back into 2025."
Wholesale Price Index (WPI)-based inflation is expected to have surged to a 15-month high of 2.5 per cent in May from 1.26 per cent in April, the poll showed.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Jun 10 2024 | 3:27 PM IST

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