India CPI Preview: Forecasts from three major banks, inflation likely eased below 6% in March

India will release March Consumer Price Index (CPI) data on Wednesday, April 12 at 12:00 GMT and as we get closer to the release time, here are forecasts from economists and researchers of five major banks regarding the upcoming inflation data.

Inflation is expected at 5.8% year-on-year vs. 6.44% in February. If so, inflation would be the lowest since December and back within the 2-6% target range.

ANZ

“We expect both headline and core inflation at 5.9% YoY, or below 6% – the upper end of the official target range. This follows two months of inflation breaching the target range. Base effects turned favourable in February and became larger in March. We expect food inflation to have eased below 6% last month, although food prices likely rose in sequential terms. Overall, helped by base effects, it is likely that inflation will now average below 6% in Q2.”

Standard Chartered

“CPI inflation likely eased to 5.6% from 6.4% in February, on favourable base effects and a correction in food prices. However, core inflation likely stayed sticky at 6% on price pressures in Gold (and the broader personal care sub-segment) and communication (mobile tariff hikes), among others. Going forward, we expect inflation to remain in a broad range of 5-5.6% in FY24; inflation is likely to remain at sub-5% in April-June, albeit driven by favourable base effects. We believe the repo rate has peaked, following the surprise on-hold decision by the Monetary Policy Committee (MPC) in April. The MPC is unlikely to see the need to hike further unless inflation once again moves above or closer to the upper threshold of the mandated band of 2-6% (with 4% the medium-term target).”

SocGen

“India’s March 2023 CPI likely decelerated by 0.70%, as we are entering a period of high statistical base effect that will last for the next eight months. While average prices are still moving up, headline CPI inflation likely dropped to 5.7% YoY from 6.4% in February. Food prices appear to have come down due to sharply moderating vegetable prices. Spice and cereal prices remain high, though both appear to have peaked too. Despite the sharp disinflation, core inflation likely saw only a modest decline. Although goods price inflation has peaked, prices continue to rise despite aggregate domestic demand being weak. We continue to maintain that rising GST rates and a high level of corporate concentration will ensure that goods prices do not drop off sharply despite weak demand. Compared to goods inflation, service inflation appears modest. The other driver of core inflation is residential building and land prices.”