Economists have forecast headline CPI inflation to fall below 6 per cent — the Reserve Bank of India mandated upper tolerance level — because of the softer prices of perishable items.
However, they cautioned that upside risks persisted because of deficient rainfall.
Given the projected drop in inflation, the central bank is expected to again go for a status-quo in the policy repo rate at its next meeting in October.
According to economists at Emkay, the September inflation could decline to 5.86 per cent, with perishable food prices falling sharply. They said onion prices have risen significantly this month, though lower than the price hike in tomatoes.
However, tomato prices will subside, which will lower food inflation.
“There is a worrying trend in food inflation, with sustained inflation for non-perishables (pulses, cereals, spices) keeping overall inflation elevated even as transient price spikes for perishables fade,’’ a note from the brokerage said.
The reduction in LPG cylinder prices by Rs 200 will impact the inflation print next month, with an expected reduction of 20-25 basis points.
Hitesh Suvarna of JM Financial said fall in August inflation was on account of moderation of prices across food categories, signalling the government’s supply-side interventions were taking effect. The brokerage has forecast 5.6 per cent inflation in September.
CAD spike fear
The spike in global Brent crude price to over $92 per barrel would result in the full-year current account deficit (CAD) going up 20 basis points (bps) to 1.8 per cent of GDP, economists said.
They had projected CAD of 1.6 per cent of GDP for 2023-24, assuming the Indian crude oil basket will average $85 per barrel for the fiscal year.
Indian crude hit $90.7 per barrel in the first week of September after averaging $80.1 per barrel in the first five months of 2023-24.
If Brent stays elevated for the remainder of the fiscal, the full-year average price for the Indian crude basket could be $86-87 per barrel.
“Assuming India imports 5 million barrels per day of oil, the full-year current account deficit will likely increase approximately 20 basis points (bps),” Rajani Sinha, chief economist, CareEdge, said.
