By Vivek Mishra
BENGALURU (Reuters) – Consumer price inflation in India likely fell to 5.3% in December on moderating food price rises, a Reuters poll of economists showed, bolstering expectations for an interest rate cut by the central bank next month amid slowing economic growth.
Food prices, which make up nearly half of the country’s consumer price index (CPI) basket, have kept inflation elevated in recent months, largely driven by a sustained surge in vegetable prices, which have risen mostly by double-digits for a year.
However, they have started to ease thanks to a bumper summer crop harvest supported by favourable monsoons, offering hope for further moderation in coming months.
The Jan. 6-9 Reuters poll of 43 economists showed inflation as measured by the annual change in the consumer price index (CPI) fell to 5.30% in December from 5.48% in November.
Estimates for the data, set to be released on Jan. 13 at 1030 GMT, ranged from 4.50% to 5.60%.
“The slow pace of easing in inflation is attributed to a delayed correction in vegetable prices given unseasonal rains in October and upward momentum seen in other food sub-segments like edible oils, cereals, with some cooling seen in December,” wrote Kanika Pasricha, chief economic adviser at Union Bank of India (NS:UNBK).
Core inflation, which excludes volatile items such as food and energy and is seen as a better gauge of domestic demand, was forecast to be 3.70% in December, according to the median estimate from a smaller sample of 17 economists.
The Indian statistics agency does not publish core inflation data. Economists estimated it was between 3.64% and 3.70% in November.
While price rises have eased modestly, inflation is not expected to return to the central bank’s 4% medium-term target at least until the second half of 2026, a separate Reuters poll showed.
A majority of economists in a survey taken last month, before Sanjay Malhotra was appointed as Reserve Bank of India (NS:BOI) (RBI) Governor to replace Shaktikanta Das, showed the central bank will cut its key interest rate by 25 basis points to 6.25% at the Feb. 5-7 policy meeting.
This would be mainly to support the economy, which was growing around 7-8% but slowed to just above 5% in the July-September quarter.
“We continue to expect a rate cut from the RBI in Feb with growth likely to undershoot the RBI’s 6.6% forecast,” Teresa John, deputy head of research and economist with Nirmal Bang Institutional Equities, wrote in a note.
Wholesale price index-based inflation is expected to have surged to 2.30% last month from 1.89% in November, the survey also showed.