India August retail inflation expected below 7%

India’s annual retail inflation in August is expected to fall below 7% after unexpectedly rising to a 15-month-high of 7.44% in July, an economist at Motilal Oswal said on Thursday.

Retail inflation rose as of last count as prices of vegetables and cereals skyrocketed, beating all market expectations and putting pressure on the government to bring down prices.

“I think we must look at the drivers of higher inflation in India and not unnecessarily be worried about vegetable-led headline data,” Nikhil Gupta, economist, institutional equities research at Motilal Oswal, said in an interview on the Reuters Trading India forum.

Gupta was the only economist who forecast July’s retail inflation above 7% in the Aug. 3-8 Reuters poll of 53 economists, coming closest to the actual number released on Monday. Average expectations were for a rise of 6.40%.

India’s central bank has a 2%-6% tolerance band for retail inflation.

Gupta said he expects vegetable prices to keep inflation elevated in August though the headline number would be below 7%, before slipping under 6% in September. He did not expect core consumer price-based inflation to rise further.

“We expect (core inflation) to keep softening very gradually and remain 4.5%-5.0% for most of the months in fiscal year 2024,” he said.

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