INSTANT VIEW 3-India’s retail inflation eases to 4.35% y/y in Sept

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BENGALURU, Oct 12 (Businesshala) – India’s annual retail inflation fell to 4.35% in September from 5.30% in the previous month, government data released on Tuesday showed.

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Analysts in a Businesshala poll had predicted annual inflation at 4.5%.

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SAKSHI GUPTA, SENIOR ECONOMIST, HDFC BANK, GURUGRAM

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“Today’s inflation print supports the RBI’s calibrated and gradual approach towards liquidity normalisation. Besides, it is likely to ease some pressure from the bond market, where the 10-year yield has strengthened after the RBI suspended G-SAP last week.

“While the picture on inflation looks rosy for now, we still may not be out of the woods as global inflation concerns continue to grow.”

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“The energy crunch and rising oil prices are already having an impact on the production and prices of other commodities. It remains an upside risk to inflation after the base effect ends in December.

“Renewed inflationary pressures as well as any signs of a slowdown in growth (due to global supply disruptions) could again put the central bank in a tight position. But this time the scale of inflation could be heavy.

Radhika Rao, Economist, DBS Bank, Singapore

“The moderation scale in September CPI inflation was along expected lines, providing a momentary relief. The major part of the pullback is due to base effect and administrative steps (lower import duty on edible oils etc.), notwithstanding, core inflation surpassed the headline to remain stable at 5.8% year-on-year.

“We expect the downdrift to last for the next few months, potentially slipping below 4%, before reversing higher.”

“Beyond the near-term relief, delayed rains boosting staples (vegetables), higher energy/coal prices pass-through, rising input prices, service sector reopening pressures and dwindling base impacts from headline CPI Likely to come back above 5.0. % yo in March 2022 quarter.”

Madhavi Arora, Chief Economist, Emkay Global Financial Services, Mumbai

“While helped by the core impact and a fall in food prices, price pressure remains and is a pleasant surprise.”

“Core CPI inflation also rose marginally to 5.99% on rise in oil prices and higher corporate input costs. We believe that inflation is likely to remain below average as compared to the RBI’s newly revised 5.3% for FY22. “

“Going forward, while a favorable base effect and managed food inflation will moderate inflation, supply-side bottlenecks, higher energy and commodity inflation and higher pump prices will create an upside pressure on inflation.” Roopa Rege Nitsure, Group Chief Economist, L&T Financial Holdings, Mumbai

“While industrial growth has just reached pre-pandemic levels, CPI inflation has moderated mainly due to a favorable statistical base effect.”

“The future trajectories of both industrial growth and retail inflation depend on how the demand landscape unfolds in the festive season. “

“Also, none of the official figures have correctly shown the production and job losses in the unorganized sector. Keeping these factors in mind, I think the MPC’s decision to maintain the status quo in the policy of October 8 was prudent.”

Garima Kapoor, Economist – Institutional Equities, Elara Capital, Mumbai

“September inflation print fell below 4.5% for the first time in five months, supported by a higher base effect and across-the-board cooling of food inflation.”

“While the moderation in inflation for September is encouraging, there could be a small reversal in food inflation trend in October before seasonal easing on account of kharif crop arrivals from higher energy and increased vegetable prices.”

“We see risks of sticky core inflation print during the year amid the pass-through effect of higher energy prices and higher intermediate input prices due to supply disruptions in China. We expect FY22 CPI inflation to be 5.4% But with a slight upward bias.

Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities, Mumbai

“September’s CPI inflation is slightly below our expectations at 4.35%. The favorable base effect, as well as accommodation in moderation in certain foods, helped reduce the print.

“RBI had revised its Q3FY22 estimate to 4.5% and today’s print strengthens the estimate. From an inflationary perspective, there is no reason for the central bank to change the policy rate or liquidity stance, given the recent rhetoric. “

UPASNA BHARDWAJ, SENIOR ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI

“September inflation surprised to a downside, mainly led by lower food inflation. The overall H2FY22 average inflation trajectory has now been reduced by 20bps to 5%.”

“However, we continue to be wary of supply-side constraints, rising crude oil prices and constraints related to the global energy crisis and associated retail inflation.” (Reporting by Rama Venkat, Vishwa Chander, Chandini Monappa and Anuron Kumar Mitra in Bengaluru; Editing by Aditya Soni)

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