CPI numbers for March 2023 could be even lower than 5%: SBI Ecowrap

The inflation trajectory for India is expected to be benign and CPI numbers for March 2023 could be even lower than 5 per cent, due to signs of softening crude oil prices which can cool off inflationary concerns further locally, an SBI Ecowrap report said.

“We are in a paradoxical situation where inflation trajectory may not have a cascading effect on runaway exchange rate dynamics as sentiments in South China Sea could steer the patchy global sentiments. Also, inflation numbers in US are likely to head lower, though core might remain elevated,” the report added.

On Friday, data by Ministry of Statistics and Programme Implementation showed that the CPI inflation moderated to 5-months low to 6.71 per cent in July due to easing of food inflation, while, core CPI also moderated to 10-months low to 5.79 per cent in July.

“Our slicing of CPI inflation into Supply/Demand CPI and Neutral indicates that supply side factors which were responsible for 65 per cent of CPI inflation in May now stands at 58 per cent, mainly owing to easing of global supply disruptions. Demand factors’ contribution has reached 40 per cent.

“Though, the overall CPI inflation eased from April to June, among the states, but there are many bigger states, whose inflation continue to be above 7 per cent in July 2022. Among the 23 states, there are 15 states whose inflation is above 6 per cent (21

states in April) and 8 states with inflation rate of below 6 per cent,” it said.

Telangana clocked the highest inflation rate of 8.58 per cent in July, compared to 10.05 per cent in June. Further, Telangana’s rural inflation is above the urban inflation.

Internationally, the inflation in the US has also moderated which increases expectations that US Fed will go slow on rate hikes. But, going by the past precedents, Fed can still aggressively raise rates. In the short run, the dollar will appreciate due to falling US inflation and Fed’s hawkish stance, it added.

On the rupee front, in the short run, the dollar will appreciate due to falling US inflation and Fed’s hawkish stance. There will be flight to safety and the FII flows will be driven by sentiments. The appreciation of the US dollar can feed into imported inflation pressures in India leading to slower correction in CPI reading, and that remains as an upside risk, the report said.

–IANS

manish/vd

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor