India inflation rate likely rose to 6.9% in August, says Deutsche Bank

Deutsche Bank estimates that India’s consumer price index (CPI) firmed to 6.9% year-on-year in August, while core inflation likely stood at 6%.

The Asian nation will report the data next Monday.

While Brent crude oil prices have recorded a steep decline in recent weeks, the favourable impact will be less reflected in the CPI as fuel items account for a very small weight, Deutsche Bank said.

Meanwhile, the risks to food inflation persist with negative seasonality kicking in for the September-November period, the bank said

“Key vegetables tend to shoot up during this period,” said Kaushik Das, chief economist for India and South Asia at Deutsche Bank.

Besides seasonality, Das highlighted that sowing of pulses has also fallen by 5% year-on-year.

“These could be potential risk factors, which could keep food inflation momentum high, consequently resulting in an elevated CPI closer to the 7% mark,” he said.

The Reserve Bank of India will continue with rate hikes, likely delivering another 75 bps to 85 bps bump up in the rest of this financial year, Das said.

“Though we would expect the central bank to hike rates in smaller clips from the September meeting, given the significant front-loading (around 200 bps – 205 bps of tightening has already happened) that has already been delivered to protect against future growth headwinds.”

(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