May Inflation Likely To Be Low: Poll

India consumer price inflation is likely to have moderated to a six-month low in May on a softer rise in food prices as supply disruptions eased after businesses reopened from the coronavirus lockdown in many parts of the country, a Reuters poll found.

The June 4-9 poll of 35 economists showed that the consumer price index (CPI) was forecast to rise to 5.50% in May compared with a year ago.

Government statistics for April headline data were not published because of the lockdown, so the latest comparable figure is for March, which was revised down to 5.84% from 5.91% initially.

If publication goes ahead and the Reuters consensus forecast is realised, it would be the lowest inflation rate since November. But it would also mark the eighth consecutive month that inflation is above the Reserve Bank of India’s medium-term target of 4.00%.

Some economists also expected price pressures for food to be moderate over the coming months based on expectations for the monsoon to be timely and normal.

Also, minutes of the latest unscheduled Reserve Bank of India meeting in late May, where it again cut the repo rate by 40 basis points to 4.00%, showed the central bank’s policy focus is aimed at reviving the economy first before worrying about the inflation outlook.

The poll forecast that India’s industrial output as measured by the Index of Industrial Production, or IIP, also scheduled for release on June 12, was likely to have contracted by an annual 44.9% in April after shrinking 16.7% in March.

That was mainly due to a contraction of 38.1% in infrastructure output – made up of eight main industries – including coal, crude oil and electricity – and accounts for nearly 40% of the country’s overall industrial production.