By Pranoy Krishna
BENGALURU (Reuters) -An easing of food price rises and a high base likely helped Indian inflation slow to a more than six-year low in June, according to a Reuters poll of economists.
Food inflation probably continued to ease from last year’s elevated levels as supplies from a robust spring harvest reached markets, helping to offset the impact of an uneven monsoon that pushed up prices of a few key vegetables.
Consumer inflation, as measured by the annual change in the Consumer Price Index (CPI), eased to 2.50% in June from 2.82% in May, the July 7-10 survey of 50 economists showed.
The predicted drop marks the longest stretch in nearly six years that inflation has stayed below the Reserve Bank of India’s medium-term target of 4%.
Forecasts in the survey ranged from 1.80% to 3.50%.
The expected moderation, marking the longest disinflationary streak in India in at least a decade, was largely due to a high base as vegetable prices had surged nearly 30% during the same period last year.
June CPI data is due to be released on Monday at 1030 GMT.
“We are expecting inflation to cool off further on a combination of base effects plus…food price momentum trailing seasonal trends,” said Kanika Pasricha, chief economic adviser at Union Bank of India.
“A good rabi (spring harvest), wheat and rice stocks overall are adding up to support lower food inflation,” she added.
Inflation will average 3.6% this fiscal year, slightly below the RBI’s 3.7% forecast, a separate Reuters poll last month projected.
That subdued outlook gave the central bank room to front-load a larger-than-expected 50 basis point rate cut in June to support weak domestic demand, as it shifted its policy stance to neutral, signalling limited room for further easing.
However, several economists in the latest poll said if price pressures remain muted outside of supply-side shocks there may be scope for additional interest rate cuts.
“There could be more than one rate cut,” said Gaura Sengupta, chief economist at IDFC First Bank.
“But the issue is there’s always a supply-side shock that comes in…and that clarity they will only get in the October and December meetings.
The fact that they have stated a neutral stance also means they are not in a hurry to cut.”
Core inflation, which strips out volatile components like food and fuel and better reflects domestic demand, was expected to have risen to 4.30% year-on-year in June up from an estimated 4.20% in May.
The Indian statistics agency does not officially publish core inflation data.
Meanwhile, inflation based on the Wholesale Price Index (WPI) was expected to have edged up to 0.52% in June from 0.39% in May, the poll showed.
(Reporting by Pranoy Krishna; Polling by Rahul Trivedi and Veronica Khongwir; Editing by Ros Russell)
