India's CPI Likely To Have Cooled In March To A 5-Month Low, Food Inflation Concerns Linger; Reports

India's consumer price inflation is expected to have eased to a five-month low of 4.91% in March, according to a recent Reuters poll of economists. However, this figure remains above the Reserve Bank of India's (RBI) medium-term target of 4%, signalling persistent challenges, particularly in the food sector.

RBI Governor Shaktikanta Das highlighted the ongoing concern over food price volatility, which has been a recurring issue in recent months. The rise in food prices has been outpacing headline inflation, impacting millions of vulnerable households reliant on government food subsidies.

Economists predict a slight easing in consumer price inflation from February's 5.09% to 4.91% in March. Factors contributing to this decline include a slowdown in momentum across food, fuel, and core items. Shreya Sodhani, an analyst at Barclays, attributes this disinflation to both easing momentum and some favourable base effects.

Despite the expected moderation, forecasts suggest that inflation may remain above the RBI's target in subsequent quarters. Furthermore, the onset of a heat wave poses a potential challenge to the downward trend in inflation in the coming months.

Radhika Rao, senior economist at DBS Bank, identifies potential supply-side shocks as a significant risk factor. However, she notes that strong economic growth currently mitigates the immediate need for additional monetary policy support.

India's economy surpassed expectations, growing at 8.4% in the October-December quarter, outpacing major peers. Forecasts predict a robust growth rate of 7.6% for the fiscal year spanning April 2023 to March 2024.

Despite the optimistic growth outlook, expectations loom for the RBI to implement a cut to its key policy rate in the next quarter. This move is anticipated to support economic momentum and mitigate inflationary pressures.

Additionally, while official core inflation figures are not published, economists estimate core inflation at 3.27% in March, which excludes volatile food and energy prices. This measure provides insight into underlying inflation trends, contributing to policymakers' decision-making processes.

While India's consumer price inflation appears to be on a downward trajectory, concerns persist, particularly regarding food prices. With the economy showing resilience and strong growth prospects, attention now turns to the RBI's monetary policy decisions aimed at maintaining economic stability.

*Inputs from Reuters*