How does India's inflation trajectory look like?


Indian Market
by 5paisa Research Team Last Updated: 2022-09-22T15:18:44+05:30

India’s retail inflation, it seems, is unlikely to ease anytime soon. 

The country's headline retail inflation is expected to rise to a five-month high of 7.4% in September, with the risk of going higher if the momentum of food and vegetable prices picks up further in the rest of the month, Deutsche Bank said.

"Our nowcasting exercise reveals that CPI inflation is tracking around 7.4% yoy in September vs. 7.0% yoy in August," chief India economist Kaushik Das said in a note dated Sept. 20.

How has India’s retail inflation number looked vis-a-vis the Reserve Bank of India’s target?

India's retail inflation has stayed above the Reserve Bank of India's upper tolerance range of 6% for eight straight months through August.

The RBI's medium-term inflation target is 4%, with 200 basis points tolerance on either side.

How is the inflation number likely to pan out over the next few months?

Deutsche Bank expects inflation to average at 7% in October-December and 6.4% in January-March, with a full-year average projection of 6.9%, higher than the RBI's 6.7% estimate.

But what does Deutsche Bank have to say about core inflation?

Deutsche Bank expect core inflation to be 6.1% in September and to average 6% for the current financial year, with risks biased to the upside given that services-related inflation momentum could gain traction in the coming months.

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