Telecom Tariff Increase Expected To Raise Core Inflation By 0.2% In FY25: Report

After a gap of more than two and a half years, telecom companies announced a price increase of over 20 per cent, starting with the largest operator, Reliance Jio

In addition to the tariff hikes, analysts highlighted that below-average monsoon rains will also be closely watched for their impact on the inflation outlook (Image Source: Pexels)

The recent tariff hikes exceeding 20 per cent by India's leading three telecom companies (Reliance Jio, Bharti Airtel, and Vodafone Idea) are expected to elevate core inflation by 0.20 per cent in FY25, as stated by a foreign brokerage on Wednesday. Analysts at Deutsche Bank also revised their core inflation forecast, excluding food and fuel, by 0.20 per cent to 3.8 per cent.

In addition to the tariff hikes, analysts highlighted that below-average monsoon rains will also be closely watched for their impact on the inflation outlook.

The report indicated that the effects of the telecom tariff hikes will begin to manifest from July onwards, projecting that these hikes alone will increase month-on-month core inflation by more than 0.85 per cent. "Overall, core inflation will likely rise by 0.20 per cent in FY25 due to the telecom tariff hikes. Consequently, we revise our FY25 core inflation forecast to 3.8 per cent, from 3.6 per cent average earlier," it added.

After a gap of more than two and a half years, telecom companies announced a price increase of over 20 per cent, starting with the largest operator, Reliance Jio.

The report anticipates that the June core inflation, to be officially released on July 12, will stand at 3.2 per cent, marking a 0.13 per cent rise from May. 

Furthermore, the report forecasts headline consumer price inflation to reach 4.96 per cent in June, up from 4.75 per cent in May. The expected rise in June CPI inflation towards the 5 per cent threshold is attributed to higher prices of food and beverages, mainly driven by vegetables.

Meanwhile, the Reserve Bank of India (RBI), responsible for maintaining inflation at 4 per cent, anticipates that the headline inflation figure will fluctuate throughout the year. The central bank has specifically highlighted its concerns regarding the impact of food inflation.