‘Inflation may have resurged over 5% in September’

India's retail inflation expected to rise over 5% in September due to food price pressures and base effects.

India’s retail inflation may have spiked back over 5% in September, after two months under the central bank’s median target of 4%, economists reckoned, as price pressures built up for some food items like vegetables and beneficial base effects from the high inflation last year have begun to dissipate. 

The Reserve Bank of India (RBI) had estimated inflation to average 4.4% in the July to September quarter, which implies a nearly 6% spike in consumer prices in September as the first two months registered an average inflation of just 3.62%. 

“We expect headline inflation to rebound to 5.2% in September from 3.7% in August, reflecting an unfavourable base effect,” Nomura’s economists Aurodeep Nandi and Sonal Varma said in a research note.

Food inflation momentum, particularly after excluding the volatile vegetables components, eased in September, they posited, projecting a moderation in food price rise in the second half of 2024-25.

“Alongside muted core inflationary pressures, we expect headline inflation to average 4.4% in FY25, marginally lower than the RBI’s forecast of 4.5%,” they averred.

Bank of Baroda economist Dipanwita Mazumdar said consumer prices are expected to rise around 5.1% in September, with risks tilted to the upside. The official inflation numbers for last month will be released on October 14.

The bank’s Essential Commodities Index, that tracks 20 vital items, had risen 4.7% in September from 3.1% in August, with tomatoes and onions seeing a sharp price gain of 16.6% and 53%, respectively.