Written by Vivek Mishra
BENGALURU (Reuters) – India's consumer price inflation likely fell to 5.3 percent in December as food price increases slowed, a Reuters poll of economists showed, raising expectations the central bank will cut interest rates next month amid slowing economic growth.
Food prices, which make up nearly half of the country's CPI basket, have kept inflation high in recent months, driven largely by the persistent rise in vegetable prices, which have mostly risen by double digits for a year.
However, they have begun to ease thanks to a bumper summer crop harvest supported by a favorable monsoon, offering hope of further moderation in the coming months.
A Reuters poll conducted Jan. 6-9 of 43 economists showed that inflation, measured by the annual change in the consumer price index, fell to 5.30% in December from 5.48% in November.
Estimates for the data, scheduled for release on January 13 at 1030 GMT, ranged from 4.50% to 5.60%.
“The slow pace of disinflation is attributable to delayed correction in vegetable prices given unseasonal rains in October and upward momentum seen in other food sub-sectors like edible oils and cereals, with some cooling seen in December,” Kanika Pasricha wrote. Chief Economic Advisor at Union Bank of India (NS:).
Core inflation, which excludes volatile items such as food and energy and is considered a better measure of domestic demand, is expected to reach 3.70% in December, according to the average estimate from a smaller sample of 17 economists.
The Indian Statistical Agency does not publish core inflation data. Economists estimated it to range between 3.64% and 3.70% in November.
While price increases have moderated modestly, inflation is not expected to return to the central bank's 4% target over the medium term at least until the second half of 2026, a separate Reuters poll showed.
The central bank will cut its key policy rate by 25 basis points to 6.25, a majority of economists in a poll conducted last month, before Sanjay Malhotra was appointed governor of the Reserve Bank of India (NS:) (RBI) to replace Shaktikanta Das, showed the central bank would cut its key interest rate by 25 basis points to 6.25. % at the policy meeting on February 5 and 7.
The main aim will be to support the economy, which was growing at around 7-8% but slowed to just over 5% in the July-September quarter.
“We continue to expect a rate cut from the RBI in February, and growth is likely to fall short of the RBI's 6.6% forecast,” Theresa John, vice president of research and economics at Nirmal Bang Institutional Equities, wrote in a note.
The survey also showed that wholesale price index-based inflation is expected to rise to 2.30% last month from 1.89% in November.
