Consumer price inflation in India likely fell to 5.3% in December due to a moderate rise in food prices, according to a Reuters poll of economists, strengthening expectations for a reduction in interest rates by the central bank next month, amid slowing economic growth.
Food prices, which make up almost half of the country’s consumer price index (CPI) basket, have kept inflation high in recent months, largely due to a sustained rise in vegetable prices, which have seen a double-digit increase over the past year.
However, they have started to decline thanks to a bumper summer harvest supported by favorable monsoons, offering hope of further moderation in the coming months.
The Jan. 6-9 Reuters poll of 43 economists showed that inflation, measured by the annual change in the consumer price index (CPI), fell to 5.30 percent in December, from 5. 48% in November.
Estimates for the data, due to be released on January 13 at 1030 GMT, ranged from 4.50% to 5.60%.
“The slow pace of decline in inflation is attributed to delayed correction in vegetable prices due to unseasonal rains in October and upward momentum seen in other food sub-segments such as oils edibles, cereals, with some slowdown observed in December,” wrote Kanika Pasricha, chief economic advisor at Union Bank of India.
Core inflation, which excludes volatile items such as food and energy and is considered a better indicator of domestic demand, is expected to rise to 3.70% in December, according to the median estimate from a smaller sample of 17 economists.
The Indian Statistics Agency does not publish data on core inflation. Economists estimated it to be between 3.64% and 3.70% in November.
Although price increases have eased slightly, inflation is not expected to return to the central bank’s medium-term target of 4% until the second half of 2026, according to another Reuters poll.
A majority of economists surveyed last month, before Sanjay Malhotra was appointed governor of the Reserve Bank of India (RBI) to replace Shaktikanta Das, indicated that the central bank would cut its policy interest rate by 25 points by basis, at 6.25%, during the general policy meeting which will be held from February 5 to 7.
This measure would be mainly intended to support the economy, whose growth, which was around 7 to 8%, slowed to reach just over 5% during the July-September quarter.
“We continue to expect a rate cut from the RBI in February, with growth likely to be lower than the RBI’s forecast of 6.6%,” Teresa John, deputy chief, wrote in a note of research and economist at Nirmal Bang Institutional Equities.
Inflation based on the wholesale price index is expected to have reached 2.30% last month, up from 1.89% in November, according to the survey.
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