Perspective on CPI data by Ms. Rajani Sinha, Chief Economist, CareEdge Ratings
Below the Perspective on CPI data by Ms. Rajani Sinha, Chief Economist, CareEdge Ratings
“CPI inflation eased further to 2.1% in June, primarily driven by deflation in the food category. The increase in core inflation to 4.4% is not worrying as it is not broad based and is mainly attributed to double-digit inflation in personal care items. Meanwhile, WPI inflation slipped into deflationary territory, contracting by 0.1%, largely due to deflation in food as well as fuel and power.
In the food basket, there was deflation in key items such as vegetables, pulses, spices, and meat. Looking ahead, food inflation is likely to remain contained, supported by healthy agricultural activity and a favourable base. Good progress of monsoon, adequate reservoir levels and strong kharif sowing bodes well for agricultural output and food price stability. Close monitoring of the monsoon’s spatial and temporal distribution will remain crucial.
On the external front, while global commodity prices are broadly expected to remain benign, we cannot rule out intermittent spikes in midst of geopolitical conflicts. With food inflation remaining muted and demand side pressure on inflation contained, we expect average CPI inflation of 3.5% for FY26. The RBI has already front loaded the rate cuts anticipating moderation in inflation, hence we do not expect further rate cuts, unless economic growth weakens materially.”
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