Informist Poll

India August CPI inflation seen easing to 7.0% from 7.4% July

Informist, Thursday, Sep 7, 2023

By Shubham Rana

NEW DELHI – India's retail inflation rate based on the Consumer Price Index is likely to have moderated marginally in August from a 15-month high in July, primarily on account of the statistical effect of a higher base, according to a poll by Informist.

The median of the estimates of 20 economists in the poll showed headline inflation is expected to have fallen to 7.0% in August from 7.44% the previous month. The estimates ranged from 6.8% to 7.7%.

According To Data From The Consumer Affairs department, prices Of Tomato Moderated 6.8% Month-on-month In August. Prices Of Onion And potato Rose 12.6% And 2.7% Month-on-month, Respectively, During The Month.

The National Statistical Office is scheduled to release inflation data for August at 1730 IST on Tuesday.

In August last year, inflation was 7.00%.

At 7%, CPI inflation in August will be the second highest in 11 months, and the overall CPI index will rise 0.1% month-on-month, the lowest sequential rise in eight months.

The decline in headline inflation in August is also on account of moderation in tomato prices. Inflation had surged to 7.44% in July, primarily on account of a 213.7% month-on-month spike in tomato prices.

According to data from the consumer affairs department, prices of tomato moderated 6.8% month-on-month in August. Prices of onion and potato rose 12.6% and 2.7% month-on-month, respectively, during the month.

"Tomato prices have eased significantly by the end of August, but the average price for the month is still on the higher side; therefore, bigger disinflation is likely to be seen in September," Kaushik Das, chief economist, India and South Asia, Deutsche Bank, said in a report.

The surge in tomato prices is expected to subside when arrivals of the new crop start in September.

As of Wednesday, the price of tomato was down 50.1% month-on-month, though onion prices were up 11.1%.

Tomato and onion account for around 10?ch of the weight of the 'vegetables' index. The vegetables index, in turn, accounts for 6.04% of the Consumer Price Index.

"The August inflation is still led by food as core is broadly flat," said Gaura Sen Gupta, economist, IDFC FIRST Bank. "For September, we see inflation at 5.6?cause majority of the vegetable crash will show up in September."

Sen Gupta estimates inflation in August at 7.1%.

Economists expect CPI core inflation, which excludes food and fuel items, to remain flat in August. Core inflation in July was the lowest in 39 months at 4.9%.

The Reserve Bank of India has projected CPI inflation averaging 6.2% in Jul-Sep and 5.4% for the whole year. However, with inflation touching 7.44% in July, average inflation in Jul-Sep is likely to be significantly higher than the RBI's projection.

On Tuesday, RBI Governor Shaktikanta Das said the central bank remains on guard to ensure that the spike in vegetable prices does not become generalised and lead to second-round effects.

Following is a summary of the details and estimates of respondents for CPI inflation in August:

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