India’s retail inflation, based on the Consumer Price Index (CPI) likely eased to a five-month low of 4.9% in March from 5.09% in February, primarily due to the statistical effect of a high base and cut in prices of LPG, according to a poll of 20 economists. In March 2022, CPI inflation was at 5.66%.
The forecasts for March CPI print range from 4.57-5.10%. The National Statistical Office (NSO) will release the March CPI inflation data on Friday.
“We expect March CPI to come lower than February amid continued softness in core inflation and pass through of Rs 100 cut in LPG cylinder prices,” said Garima Kapoor, economist, Elara Securities.
On March 8, the government had announced `100 per cylinder cut in LPG prices. This is expected to keep the ‘fuel and light’ group, carrying at 6.84% weight in CPI, in the deflationary zone for the seventh consecutive month in March.
The government had also cut the retail prices of petrol and diesel by `2-a-litre, effective March 15. This would also aid in easing the headline CPI rate.
Kapoor expects core inflation to ease further to 3.2% in March from a series low of 3.3% in February. The 10 bps projected decline in March stems largely from the cut in petrol and diesel prices and both the components are part of the ‘miscellaneous’, which is a component of the core CPI index.
The Centre for Monitoring Indian Economy (CMIE), however, say that the rise in gold and silver prices curbed the decline in the fall of core inflation further during March.
CMIE has estimated inflation in the prices of gold and silver to have risen to 14.2% and 13% respectively in March, from 10.2% and 8.2% in February.
That said, at the projected 4.9% CPI print, the overall CPI index likely rose 0.1% month-on-month in March, mainly due to sequential rise in prices of key food items.
Data from the Department of Consumer Affairs showed, prices of both rice and pulses increased by 0.4% on month during March, but that of wheat declined by 0.4%. Potatoes’ price soared 6.1% in March, while prices of tomato and onion declined sequentially.
Economists, however, expect food inflation to have slightly eased to 8.5% in March from 8.66% in February due to the high base effect. Given projections of “above-normal” temperature and heat-waves in April-June by India Meteorological Department, food inflation is expected to stay above 6% at least till July.
Most economists have projected CPI inflation in April-June to average around 5-5.2%, which is 10-30 basis points higher than the Reserve Bank of India’s forecast of 4.9% for the June quarter.