India's inflation likely to cross 4% mark
What's the story
India's consumer price index (CPI) inflation is expected to breach the crucial 4% mark for the first time in 16 months. A CNBC-TV18 poll estimates a rise to 4.24% in June, crossing the Reserve Bank of India (RBI)'s target. The spike comes amid surging food costs and global fuel price adjustments impacting domestic markets.
Inflation indicators
Headline CPI expected to rise to 4.97%
The June CPI reading is significant as it is the first inflation print following a recent fuel price hike. It could provide insights into the inflation outlook for the coming months.
The headline CPI is also projected to rise from 4.78% in May to 4.97%.
Economists expect food prices, especially cereals, to remain under pressure due to El Nino concerns, possibly leading to further food inflation increases.
Inflation stability
New CPI series
Despite the rise in headline inflation, core CPI is likely to remain around 4%. This indicates that price pressures outside food and fuel have not increased significantly.
The June CPI estimate of 4.24% compares with 3.93% in May under the new CPI series introduced earlier this year.
If estimates are met, June would mark the highest CPI reading under this new series since January 2025 when it last crossed the 4% mark.
Inflation peak
Food inflation spike anticipated
Food inflation is also expected to hit its highest level since December 2024, driven by a rise in cereal prices.
Economists have flagged weather-related risks linked to El Nino as a factor that could keep food prices elevated.
Despite the increase in headline inflation, core CPI is expected to remain at around 4%, indicating that price pressures outside food and fuel have not risen significantly.