India's retail inflation eases to 6.83% in August

(Reuters) - India's annual retail inflation eased to 6.83% in August from a 15-month high of 7.44% in July as food prices moderated, government data showed on Tuesday.

A Reuters poll of 45 economists had forecast a rate of 7%.

Food inflation, which accounts for nearly half of the overall basket, was up 9.94% in August compared with a rise of 11.51% in July.

COMMENTARY:

GAURA SEN GUPTA, ECONOMIST, IDFC FIRST BANK ECONOMICS RESEARCH, MUMBAI

"Upward pressure on food inflation persists, with nearly 60% of the food and beverages subcomponents by weight, seeing 6%+ inflation in August. These items include vegetables, cereals, pulses, spices and milk."

"The upward pressure on vegetables tends to be short-lived due to multiple cropping seasons and this trend is seen in tomatoes. However, items such as cereals and pulses, though less volatile, tend to show persistent upward pressure."

YUVIKA SINGHAL, ECONOMIST, QUANTECO RESEARCH, NEW DELHI

"The intense dry spell of rainfall since early August and its possible impact on Kharif crop yields, reservoir levels and soil moisture content for the Rabi season as well as the hardening of global crude oil prices are some of the risks that remain on watch."

"As of now, we hold on to our FY24 CPI inflation estimate of 5.5%, with the timeline of RBI commencing its rate cut being pushed to the first half of FY25."

SAUGATA BHATTACHARYA, EXECUTIVE VP, AXIS BANK, MUMBAI

"This provides a buffer for monetary policy, reducing the pressure to tighten further. However, the core inflation remains stubborn, at 4.8%, which elongates the glide path for inflation to go down durably to the target 4%, which will likely result in a higher than longer path for interest rates."

TERESA JOHN, DEPUTY HEAD OF RESEARCH & LEAD ECONOMIST, NIRMAL BANG, MUMBAI

"This suggests that the RBI will remain on an extended pause and, if this trajectory sustains, we anticipate a rate cut in February 2024."

DEVENDRA KUMAR PANT, CHIEF ECONOMIST, INDIA RATINGS & RESEARCH, GURUGRAM

"While the vegetables inflation is expected to decline in coming months, elevated cereals inflation in excess of 10% in the last 12 months will have an impact on consumption. Inflation is expected to decline further in September."

"Despite inflation being higher than the RBI's upper bound of 6%, it is unlikely that it will raise policy rates. However, it will continue to monitor the price situation closely."

SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM

"Some good news on the inflation front in this print. But the balance of risks still remains on the upside, given monsoon performance remains weak."

"The RBI could take some comfort from this print. But, given headline (inflation) is still significantly above 6%, we expect liquidity tightening to continue. The next inflation print is expected to show further moderation but still remain above 6%."

SUVODEEP RAKSHIT, SENIOR ECONOMIST, KOTAK INSTITUTIONAL EQUITIES, MUMBAI

"CPI inflation should moderate further to around 5.5% by December if the current trend of food prices persists. We continue to expect the RBI to remain cautious as inflation remains well above the 6% mark."

"We maintain our call for an extended pause as the RBI watches for the domestic growth-inflation mix, food prices trend and impact on inflation expectations, and impact of global monetary policy decisions on the rupee."

UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI

"August retail inflation came in line with our expectations, led largely by moderation in vegetable prices and easing core inflation. These figures should provide some breathing space to the MPC (monetary policy committee)."

"However, we continue to remain watchful on the cereals, pulses and rising oil prices. Overall, today's readings reinforce our view of a prolonged policy-rate pause with a clear caution on any risks arising for generalised inflation."

(Reporting by Ira Dugal, Hritam Mukherjee, Meenakshi Maidas, Ashish Chandra, Yagnoseni Das, Nishit Navin and Navamya Ganesh Acharya; Editing by Savio D'Souza)