By Pranoy Krishna
BENGALURU (Reuters) – India’s consumer inflation likely fell sharply to a five-month low of 4.60% in January from 5.22% in December on slowing food price rises, according to economists polled by Reuters.
Such a fall would be a relief for most Indian households, who spend a significant amount of their budgets on food.
A sharp decline in inflation will also be welcomed by the Reserve Bank of India, which cut the repo rate by 25 basis points to 6.25% late last week.
Fresh winter produce reaching local markets has moderated food price rises, which make up about half of the consumer price index (CPI) basket.
Within food items, cooling vegetable prices probably contributed the most, economists said.
Inflation as measured by the annual change in the CPI, dropped to 4.60% last month, according to the median estimate in a February 4-10 Reuters survey of 56 economists.
Forecasts for the data, due on February 12 at 1030 GMT, ranged from 4.20% to 5.10%.
“Apart from wheat and vegetable oil (prices), all other food categories are showing signs of moderation. The softness in food prices, usually witnessed during winter months, is also supported by a healthy kharif (autumn season) output,” said Sakshi Gupta, principal economist at HDFC Bank.
Sharply falling inflation also gives the central bank some wiggle room in its new focus on addressing slowing economic growth as overall inflation is still above its 4.0% medium-term target.
Kanika Pasricha, chief economic advisor at Union Bank of India, said “inflation pressures are moving towards their target…in the coming three to six months” and expects “inflation settling down at 4%.”
The RBI’s mandate is to keep inflation within a 2-6% target range.
Core inflation, stripped of volatile food and energy prices, is expected to have risen slightly to 3.70% from an estimated 3.60% in December, the poll also found.
The Indian statistics agency does not publish core inflation data.
(Reporting by Pranoy Krishna, Polling by Anant Chandak and Veronica Khongwir; Editing by Hari Kishan and Sharon Singleton)
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