Perspective on CPI Data by Ms. Madhavi Arora, Chief Economist, Emkay Global Financial Services
Below the Perspective on CPI Data by Ms. Madhavi Arora, Chief Economist, Emkay Global Financial Services
The inflation undershoot continues across wholesale and retail prices. CPI inflation surprised on the downside, with a much lower sequential vegetable prices, and even ex-veg, food inflation has managed to be on a downtrend. Core retail inflation-ex gold, on the other hand, has also fallen sequentially, printing 3.7% vs 3.8% in May. Mandi prices so far are suggesting manageable July perishable food price pressures, with July month tracking 1.7-1.8% as of now. The positive inflation surprise and near-term visibility on lower inflation suggest that the RBI may miss its inflation targets for the year by 80-100bps, with FY26E inflation likely to form a new reset below even 3.0% - much lower than RBI’s current estimates of 3.7%, helped largely by food inflation, while core turns higher to average ~4.3%.
Meanwhile, WPI inflation softness is also attributed to declines in manufacturing and food prices, with sequential deflation continuing in June as well. Looking ahead, the recent decline in commodity prices, particularly crude oil, could meaningfully impact the trajectory of WPI inflation. The continued depression in WPI inflation -a prime price deflator in GDP calculations - will also statistically boost real GDP growth.
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