India’s CPI inflation likely to have eased slightly in July

India’s headline inflation is expected to have slowed slightly in July. According to a Societe Generale report, the headline CPI for July is likely to have eased to around 5.6 percent year-on-year, a bit lower than June’s 5.8 percent. However, it would still be more than the RBI’s January 2017 target of 5 percent year-on-year. The anticipated headline figure would be the ninth time in the past 10 months that the CPI figure has been more than 5 percent. The average headline print for the period was 5.4 percent year-on-year.

Following a recent sharp rise in food prices on a monthly basis, prices of food appeared to have eased, particularly pulse prices as increasing imports have begun making a dent on domestic prices, stated Societe Generale. Vegetable prices have also shown certain signs of slowing down. However, prices of protein, particularly egg, meat and fish have continued to firm up.

Even if the monsoon gives certain sentimental relief to the stock market, there is concern regarding the spatial distribution of rainfall and therefore the possible effect on food inflation.

“We expect India’s headline inflation to remain elevated going forward and likely above the RBI’s January 2017 target,” added Societe Generale.