Acuité Ratings & Research expects the headline inflation to average 5.6% in FY24 and remain in the band of 5.0%-5.5% in the second half of the fiscal
FinTech BizNews Service
Mumbai, November 14, 2023: India’s headline retail inflation expectedly has taken a further dip to 4.87% in Oct-23 from 5.02% in Aug-23. However, overall price pressures remain with a sequential rise of 0.65% in the CPI and 1.06% in the food category. On an annualized basis, food inflation still continues to be almost at the same level at 6.6%YoY as compared to the Sep-23 print.
Vegetable prices have increased sequentially by 3.38% primarily due to a spurt in onion prices seen over the last month. Pulses inflation stood higher at 18.79% YoY with a further sequential rise of 2.54%. Cereal inflation also continues to be in double digits at 10.65% YoY despite the steps taken by the government to cool down the market prices of wheat and rice. Given the concerns on the yield in the upcoming kharif crop and the El Nino phenomenon, the upside risks to food inflation remain.
Suman Chowdhury, Chief Economist and Head – Research, Acuité Ratings & Research informs: “We expect the headline inflation to average 5.6% in FY24 and remain in the band of 5.0%-5.5% in the second half of the fiscal. While that headline inflation will be largely in line with RBI projections, we believe that the geo-political risks in the background and the food output risks will keep the RBI MPC watchful and any reversal of the monetary policy stance is unlikely to happen before Q2FY24.”
Key takeaways from the report:
1. India’s CPI inflation moderated to a 4-month low of 4.87% YoY in Oct-23 from 5.02% in Sep-23.
2. The moderation was aided by a favorable statistical base as annualized inflation eased despite a sequential jump of 0.65% MoM in the headline CPI index during the month.
3. The Oct-23 inflation print offers comfort as it confirms the complete reversal of the earlier tomato price shock, continuation of deflation in case of fuel items, and gradual deceleration in core inflation.
4. Notwithstanding these risks, we believe there could be a minor downside to our FY24 CPI inflation estimate of 5.6%. Having said so, it would be prudent to ride out the elevated geopolitical uncertainty in the near term to get a clear picture.
5. Going forward, CPI inflation is expected to remain in the 5.0-5.6% range over Q3-Q4 FY24, providing comfort to the MPC to maintain a pause in the remaining two policy reviews in FY24 (i.e., in Dec-23 and Feb-24).
(DISCLAIMER: This report is based on the data and information (data) obtained by Acuité
from sources it considers reliable. Although reasonable care has been taken to verify the
data, Acuité makes no representation or warranty, expressed or implied with respect to the
accuracy, adequacy or completeness of any Data relied upon. Acuité is not responsible for
any errors or omissions or for the results obtained from the use of the report and especially
states that it has no financial liability, whatsoever, for any direct, indirect or consequential
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should not be treated as a recommendation or endorsement or opinion or a substitute for
reader’s independent assessment)
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