Inflation In India Likely Hit 18-Month Low In April: Economists Poll

A Reuters’ poll of 53 economists showed inflation, as measured by the annual change in the consumer price index (CPI), was forecast to have fallen to 4.80 per cent in April from 5.66 per cent in March

The consumer inflation in India likely cooled to an 18-month low in April as rises in food and fuel prices moderated, keeping it below the Reserve Bank of India's (RBI’) upper tolerance level for the second consecutive month, according to a Reuters poll of economists. India’s food inflation, which accounts for nearly half of the overall consumer price basket, was expected to have fallen again in April, as price rises of cereals and edible oils softened.

According to the Reuters’ poll of 53 economists, inflation as measured by the annual change in the consumer price index (CPI), was forecast to have fallen to 4.80 per cent in April from 5.66 per cent in March. Forecasts ranged from 4.40 per cent to 5.80 per cent, with respondents expecting inflation to remain below the central bank’s 6.00 per cent upper tolerance limit for the second consecutive month.

Radhika Rao, senior economist at DBS Bank, said, "Food inflation was a mixed bag on the month, with cereals and vegetables easing, whilst pulses and milk rose. Lower energy prices continue to filter through to fuel components. With inflation off the boil besides core (inflation), the RBI is likely to remain on an extended pause."

However, inflation was expected to remain well above the RBI's medium-term target of 4.0 per cent in the coming quarters, according to a separate poll. It would average 5.3 per cent for the current fiscal year and 5.0 per cent for next.

The RBI which kept its main interest rate unchanged at 6.50 per cent at the April meeting was forecast to extend the pause until at least the end of this year, marking an end to the central bank's modest tightening cycle.

"We are looking at April and May being the bottom on inflation and then we start seeing slight upward movement above 5.0 per cent, although below the RBI's 6.0 per cent," said Upasna Bhardwaj, chief economist, Kotak Mahindra Bank. "The near term looks comfortable in terms of inflation. But eventually the RBI will have to target its real rates being higher than 1 per cent. For that to be sustained, they will have to be on a pause. A rate cutting cycle at this moment may be slightly premature," Bhardwaj added.

The survey also showed wholesale price inflation, which measures the change in producer prices, is likely to have fallen to -0.20 per cent last month compared to a year ago.