India’s Retail Inflation May Average At 4% In 2019-20: SBI Research Report
A day after government data indicated India’s retail inflation breached the Reserve Bank of India’s threshold in October, a research report by State Bank of India said the Consumer Price Index will average around 4 percent in 2019-20.
In 2019, five states—Rajasthan, Madhya Pradesh, Maharashtra, Gujarat and Karnataka—bore the brunt of excess rainfall and were affected by severe floods. The surplus rainfall during August and September damaged several kharif crops.
"Going forward, thus, food and vegetable prices could remain elevated and inflation prints in November still may be on a higher side due to the low base in 2018. We expect FY20 CPI to now average closer at 4 percent," SBI's Ecowrap indicated.
But even as food inflation will remain elevated, core inlfation will go below 3 percent in this fiscal, the report stated.
In the fourth bi-monthly monetary policy announced in October, RBI had projected India’s retail inflation at 3.5-3.7 percent for the second half of 2019-20 and 3.6 percent for the first quarter of 2020-21.
RBI may cut repo rate in the December monetary policy meeting and may pause thereafter on concerns over inflation, according to the SBI Research report.
"We expect a December rate cut, but beyond December it will be a close decision (as inflation prints beyond October will remain elevated). Thus, it will be better if the rate cut is front loaded in December," the report added.