India: Inflation pressures point to tighter bias – DBS

DBS Group Research expects India’s inflation to accelerate to 4.9% year-on-year, with food and energy costs driving a gradual broadening of price pressures. Chief Economist Taimur Baig and strategist Chang Wei Liang see inflation staying above 5% in the second half of the fiscal year, underscoring a tighter policy bias, while the goods trade deficit likely remains wide at around $30 billion.

Rising food and energy costs lift CPI outlook

"India’s inflation is expected to quicken to 4.9% yoy from 4.4% month before."

"A gradual broadening of price pressures is likely to keep inflation readings above 5% in second half of the fiscal year, underscoring the need for a tighter policy bias."

"Energy prices have remained volatile, raising input cost pressures that could gradually filter through to consumers, even as retail fuel prices have been kept unchanged since May."

"After two years of normal monsoon, cumulative southwest rainfall this year is currently 15% below the long-term average (as of early-September), alongside slower build-up in reservoir levels, which could impact upcoming rabi crops as well."

"The goods trade deficit is, meanwhile, likely to stay wide at $30bn as an improvement in exports is accompanied by a further widening in the energy import bill."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)