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Retail sales inflation fell to 4.35% in September;  Experts discuss


Retail price inflation fell to 4.35 percent in September, mainly due to lower food prices, government data showed Tuesday. Inflation based on the Consumer Price Index (CPI) was 5.30% in August and 7.27% in September 2020.

According to data released by the National Statistics Office (NSO), food basket inflation fell to 0.68% in September 2021, down sharply from 3.11% the previous month.

The Reserve Bank of India (RBI), which primarily takes CPI-based inflation into account when shaping its bimonthly monetary policy, has been instructed by the government to keep it at 4% with a margin of tolerance 2% on each side.

Rupa Rege, Nitsure, chief group economist at L&T Finance Holdings, said the figure was in line with expectations. She pointed to the RBI governor’s statement on Friday that inflation will be supported by statistical base effects.

“It was eagerly awaited, but we have certainly seen such volatility in the prices of food products, especially vegetables and fruits, etc., perishable prices that one cannot be so far from the trajectory of the market. “food inflation. So certainly from that point of view it’s a pleasant surprise,” she said.

She said, however, that one cannot be so sure about the trend of food inflation, but there are aspects of food inflation and fuel inflation that pose a risk to the path of inflation.

RBI Governor Shaktikanta Das said last week that overall, overall CPI dynamics are moderating, which, combined with favorable base effects in the coming months, could lead to a substantial slowdown. short-term inflation.

The RBI has projected CPI inflation at 5.3% for 2021-2022, 5.1% in the second quarter, 4.5% in the third and 5.8% in the last quarter of the fiscal year with risks broadly balanced.

Saugata Bhattacharya, Chief Economist at Axis Bank, said: “That’s a large number, we were also at 4.5, just like in line with market consensus. The first data for vegetables certainly shows an increase at the beginning of October. Overall, food prices should still remain relatively under control.

According to Bhattacharya, the seedlings were good because the governor of the RBI mentioned the levels of the reservoirs, except in the north which are still good. Therefore, not only kharif but rabi prospects are also quite good.

“Overall, from what we’re seeing in terms of core inflation, our expectation was 6% and the actual number is 5.75 underlying. So no matter what is good, because it reduces the entire trajectory of the CPI index, ”he said.

Bhattacharya added that in the future, price pressures will be slightly lower than initially seen. “But given the upheavals in supply that we are seeing, we still have to be very careful especially in the core,” he added.

DK Joshi, chief economist at CRISIL, said the agency will cut forecasts for the third and fourth quarters.

“Food inflation is turning out to be more benign than we expected. There is a base effect playing here and this base effect is going to keep food inflation low almost until the end of the year. After that, in order to keep inflation low, it is very important that the bottlenecks on the supply side start to ease. Otherwise, food inflation will start to gradually increase on the base effect and at the same time the kernel and fuel will remain high, ”he explained.

He said that inflation concerns have not gone away and that if you look at the RBI’s Industrial Outlook Survey in the Monetary Policy Report, it makes it clear that it is Whether in manufacturing, services or infrastructure, the entities expect there to be an escalation in costs and they also see an increase in selling prices for the third quarter.

“Obviously there is pressure on inflation which will be there in the third quarter on the fuel side as well as the kernel side. The food element, which will keep it low, is a very volatile component of inflation. overall and very difficult to project, the rains can cause temporary peaks there, so I would say that’s a good number, ”Joshi said.

On what to expect from the RBI in December in terms of a surge in repo, Jayesh Mehta, chief executive and national treasurer of Bank of America said the market consensus is for a surge in repo, but he there are too many aspects in place to play at this point.

“If you look at the past 10 days, the way the global energy, the global coal shortages, including India, right now, it’s like half empty half full. Some people who may worry about it will drive up inflation and therefore force central banks to take what needs to be done to manage inflation, which does not work because these kind of energy supply issues can also destabilize growth, global growth, including India. “

If the energy problems are not solved, there will be hyperinflation but at the same time, growth will also disappear, he explained.

“On this particular point, I don’t think any central bank would really focus on inflation. On the contrary, they would always work on growth. So I’m not with the market consensus, it’s too early to tell how these things are going. Right now we’re in a very, very uncertain global situation, we don’t know what’s going on and that’s where we’ll have to wait and watch for a while what happens to these shortages in the world. energy sector. “

For the full interview, watch the accompanying video …

-With PTI inputs