According to the findings of a survey conducted by Reuters among analysts, consumer price inflation in India is expected to have reached a 20-month low in May as food price hikes slowed further. This brings India closer to the medium-term objective of 4% set by the Reserve Bank of India.
In spite of heat waves that have been seen throughout the agriculture-dependent nation, it is anticipated that increases in food prices will be held in line by decreased input costs and frequent action by the government to control price surges.
The inflation rate for food, which makes up over half of the items in the consumer price index (CPI) basket, decreased to 3.84% in April, and it was anticipated that it would have decreased even more in May.
Inflation, as measured by the consumer price index (CPI), is expected to rise at an annual rate of 4.42% in May, down from 4.70% in April and likely to be the lowest since October 2021, according to the predictions of 45 economists who participated in a survey conducted by Reuters from June 2–7.
The range of predicted values was between 4.10% and 5.10%, which is lower than the highest tolerance level of 6.00% established by the RBI for the third month running.
“In May, we are expecting a noticeable decline in the food index, especially vegetables, oils, and cereals. Fuel and core will also be down,” wrote Sonal Badhan, an economist at Bank of Baroda.
“Improvements in supply chains and the base effect are leading to a moderation in domestic food prices. Internationally, oil prices have also come down, which in turn benefits the imported inflation component.”
According to the results of the study, wholesale price inflation, which measures the change in producer prices, most likely decreased to -2.35% annually in May, down from -0.92% in April.
The Reserve Bank of India (RBI) is generally expected to leave its benchmark repo rate steady at 6.50 percent when it concludes its monetary policy meeting on Thursday. Any indications that pricing pressures are beginning to ease would offer the RBI some much-needed breathing space.
According to a second survey conducted by Reuters in May, consumer price inflation is not expected to decrease to or below the RBI’s medium-term objective of 4% any time soon, which suggests that the door is still open for more rate rises.
For the fiscal years 2023–2024 and 2024–2025, respectively, the average rate of inflation was projected to be 5.1% and 4.8%.
