13 Jan , 2023 By : Monika Singh
India’s CPI inflation is likely to cool off further in the coming months on account of lower import costs, after easing to 5.7% in December, according to economists. While retail inflation remained within RBI’s tolerance limit of 6% for two straight months, core inflation is still above 6%, and is expected to remain stubborn going forward. Easing global commodities should release some cost pressures. However, near-term pressures could arise as China reopening poses upside risk to commodities prices, said economists.
According to Emkay Global Financial Services, food inflation should provide further relief ahead, with a healthy winter harvest so far. It expects food inflation to remain below 6% in coming months. Easing global commodities including energy in general, if sustained, should release some cost pressures and may spill over to output prices (core) as well. “However, near-term pressures could arise from imported inflation through China reopening-led sustained upside risk to global commodities, uncertain FX, and from sticky services inflation,” analysts said. With domestic demand being fairly resilient, core CPI pressure may remain reasonably sticky sequentially, in the near term.
According to Vivek Goel, Co-founder and Joint Managing Director, TailWind, while moderation in the headline index is positive, sticky core inflation at 6.28% remains a concern. Further, IIP contracted to 4% in October indicating lower factory output. “It will have to be seen how RBI’s future policy actions take into account these factors in their effort to curb inflation durably while maintaining growth. We believe that even though headline inflation has come off, core inflation continues to remain sticky and it will be an important input for the future course of monetary policy,” Goel said.
CPI inflation eased in December. However, core inflation is still a cause of concern as it has remained above the 6% mark. The effects of rising rates have started to reflect in the overall inflation data, according to Nish Bhatt, Founder & CEO, Millwood Kane International. The IIP on the other hand stood at a higher single digit; most components posted a growth. “This set of economic data will certainly help as we approach the Union Budget and the RBI policy next month,” Bhatt said.
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