India's consumer inflation has been falling since January 2023, but there is some worry for the forth coming number because of the rise in tomatoes and some other food prices. Inflation as measured by the annual change in the consumer price index (CPI), likely rose at an annual pace of 4.6 percent in June, impacted by high base, according to CNBC-TV18's poll of economists. This was slightly faster than the 25-month low of 4.25 percent recorded in May.

Share Market Live

NSE

Official data on CPI-based inflation for June will be released at 5:30 pm today (July 12) and experts believe the inflation print will likely be impacted by the seasonality in vegetable prices, especially for tomatoes and onions.

The gains are broadly in line with the Reserve Bank of India (RBI)'s projections, but an impact on supply chains and crops due to an erratic weather may fan the prices further. That means the RBI will take longer to reach the mid-point of its 2 percent-6 percent target, delaying a pivot to rate cut to support growth. The central bank left the rates unchanged in the last two meetings to see the impact of past hikes on inflation.

CPI inflation was at 7.01 percent in June 2022 with food inflation at 7.75 percent.

Here's what the CNBC-TV18 poll has thrown up -

CNBC-TV18 poll (June) CPI 4.6%

May 4.25%

June 2022 7.01%

High borrowing costs may further dent demand in India's economy where growth has lost pace tracking a global slowdown. This may also pause the rally in the stock market, which have touched record highs, as per some market watchers.

“We estimate CPI gains quickened in June after a four-month slowdown. This could mark the start of a sustained pickup, propelled by food prices. We see the central bank maintaining a hawkish hold through December,” according to Bloomberg Economics.

The pressure on food prices is likely to persist over the coming months, making it less likely that inflation would return to the RBI's 4 percent target in the near term.

Food inflation, which accounts for nearly half of the overall consumer price basket, may stop its falling trend since January. Economists have upped June food CPI after surging tomato prices pushed up other food prices.

"Erratic rains and heatwave conditions have also impacted production of a few crops for which prices have seen an uptrend of late," said Dipanwita Mazumdar, economist at Bank of Baroda.

Food CPI was at 2.91 percent in May as against 3.84 percent in April and 5.95 percent in January. Food inflation was at a high of 7.75 percent in June 2022.

Prices of food items especially kitchen staples, have almost tripled in the past month, hitting low income households hardest. The food and beverages basket has a 45.86 percent weight in the combined CPI, of this vegetables have a 6.04 percent weight.

“The weather-related price disruption has also been seen in other vegetables and most notably in onion prices,” said Anubhuti Sahay, an economist with Standard Chartered Bank. She sees the risk of inflation touching 6 percent in July if the increase in food prices is sustained.

First Published:Jul 12, 2023 9:46 AM IST