India's March CPI Inflation Likely Eased But Remains Above RBI Target: Analysts

March CPI Inflation: Forecasts for the upcoming data release, scheduled for April 12 (Friday), ranged between 4.57 per cent and 5.35 per cent

Economists expect India's consumer price inflation to have softened to a five-month low of 4.91 per cent in March, according to a Reuters poll. However, the figure still surpasses the Reserve Bank of India's (RBI) 4 per cent medium-term target, primarily driven by persistent food price increases.

RBI Governor Shaktikanta Das in the latest MPC announcement highlighted concerns over food price volatility, stressing its impact on millions of low-income households heavily reliant on government food subsidies.

The April 4-8 Reuters poll, involving 50 economists, predicts a slight dip in consumer price inflation from February's 5.09 per cent to 4.91 per cent in March. Forecasts for the upcoming data release, scheduled for April 12 (Friday), ranged between 4.57 per cent and 5.35 per cent.

Analysts attribute the anticipated disinflation to a slump in momentum across food, fuel, and core items. Shreya Sodhani, an analyst at Barclays, said, "We estimate that CPI inflation moved markedly lower...The disinflation is broadly attributed to easing in momentum across food, fuel, and core items, though some base effects also helped."

However, a separate Reuters survey on the longer-term outlook suggests that inflation may return to the RBI's target in the next quarter but could surpass it in subsequent quarters. Moreover, the onset of a heatwave poses a potential challenge to the inflation downtrend in the coming months.

Radhika Rao, senior economist at DBS Bank, said potential supply-side shocks as the main risk, noting that "strong growth limits the need for additional support from monetary policy levers for the time being."

India's economy outperformed expectations, growing at 8.4 per cent in the October-December quarter. Forecasts suggest a 7.6 per cent growth over the 2023-24 fiscal year, surpassing major peers.

Despite the robust economic performance, the RBI's next move is widely anticipated to be a cut to its key policy rate in the next quarter. Core inflation, which excludes volatile food and energy prices, is estimated to be at 3.27 per cent in March, according to the median forecast of 24 economists, although official figures are not published.