BENGALURU (Reuters) – India’s annual retail inflation eased to 5.30% in August from 5.59% the previous month, government data released on Monday showed.

FILE PHOTO: A vendor waits for customers at his shop inside a vegetable market in Kolkata, India, February 12, 2020. REUTERS/Rupak De Chowdhuri

Analysts in a Reuters poll had predicted annual inflation at 5.60%.

COMMENTARY

SAKSHI GUPTA, SENIOR ECONOMIST, HDFC BANK, GURUGRAM

“Inflation surprised on the downside in August compared to consensus expectations. The softness was led by lower food inflation, especially in cereals, sugar and vegetable categories. Core inflation also dropped below 6% after remaining elevated for the last few months. Fuel inflation continued to play spoilsport at almost 13% in the month.

“Inflation readings could remain contained for the next 2-3 months, in part supported by a high base, before inching up to 6% from December onwards. For now, the sub-6% print for a second consecutive month is likely to take the pressure off the RBI to normalise liquidity just yet.

“We expect the central bank to start discussing any liquidity rollback only by the beginning of 2022.”

SREEJITH BALASUBRAMANIAN, ECONOMIST – FUND MANAGEMENT, IDFC AMC, MUMBAI

“With the August print of 5.3%, CPI (consumer price index)inflation has moved further down from its peak of 6.3% in May and June, aided by softer prices of food and beverages and base effects. Core inflation remains elevated at 5.8% y/y in August and an average of 5.9% FYTD (financial year to date), but signs of a sustainable demand recovery apart from supply-side factors continue to remain important.

“The extent of manifestation of sequentially softer cereal and vegetable prices (based on available real-time data so far in September) in official CPI, sectoral supply adjustments, commodity prices, services inflation, etc. will be crucial ahead.”

SUVODEEP RAKSHIT, SENIOR ECONOMIST, KOTAK INSTITUTIONAL EQUITIES, MUMBAI

“CPI inflation at 5.3% in August is in line with expectations and should be seen positively by the RBI (Reserve Bank of India). Core inflation has also softened from last month.

“We expect the RBI MPC (Monetary Policy Committee) to remain focused on growth as inflationary concerns remain under check.”

UPASNA BHARDWAJ, SENIOR ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI

“The headline inflation came in softer than our expectations largely led by downward surprise of food prices. We expect the subsequent readings to remain fairly benign and much lower than RBI’s estimates.

“The softer inflation would provide relief to the policy makers and more room to move much slowly in terms of policy normalisation. We continue to expect only tweaks to liquidity tools to manage temporary liquidity surplus in the near term.”

Reporting by Rama Venkat, Chandini Monnappa in Bengaluru; Editing by Vinay Dwivedi

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