By Pranoy Krishna
BENGALURU, Jan 8 (Reuters) – India’s consumer inflation likely rose for a second straight month in December to an annual rate of 1.50%, driven by a broad-based pickup in food prices and fading favourable base effects, a Reuters poll showed.
The increase follows unusually low readings in the world’s fastest-growing major economy, helped by falling food prices from strong harvests. Economists say that trend is unlikely to last as prices rise across major food categories.
The January 5–8 poll of 36 economists forecast inflation, measured by the annual change in the consumer price index, climbed to 1.50% in December from 0.71% in November, marking 11 straight months below the Reserve Bank of India’s medium-term target of 4%.
FOOD INFLATION BROADENS
Vegetable prices, a major CPI component, have fallen by double digits since April. But sequentially, food inflation rose in December as prices across most categories gained momentum, said Kanika Pasricha, chief economic adviser at Union Bank of India.
“This is generally unusual for a winter month when the food price levels normally recede,” she added.
December inflation data, due on Monday, January 12, will be the last release under the 2012 base series. India will switch to a new base year of 2024 next month, expected to reduce food weightings and increase those of non-food components.
Food currently makes up nearly half of the CPI basket, a proportion many economists say no longer reflects India’s consumption patterns.
Sakshi Gupta, principal economist at HDFC Bank, said lower food weightings could reduce the volatility of the data caused by vegetable price swings.
Core inflation, excluding food and fuel components, likely edged up to 4.53% in December from an estimated 4.2%-4.3% in November, partly due to a 7% rally in gold prices, the poll showed. India does not publish official core inflation data.
Wholesale price inflation is expected to have ticked up to an annual 0.30% from minus 0.32% in November, the survey showed.
Poll medians from a separate survey last month showed inflation averaging 2.1% this fiscal year and rising to 4.0% in the next.
(Reporting by Pranoy Krishna. Polling by Devayani Sathyan and Veronica Khongwir. Editing by Hari Kishan and Mark Potter)
