The Reserve Bank of India (RBI)'s failure to keep inflation within the mandated 2-6 percent band will likely be confirmed later on October 12, with economists predicting headline retail inflation rising to 7.3 percent in September.
According to a Moneycontrol poll of 18 economists, inflation - as measured by the Consumer Price Index (CPI) - rose for the second month in a row to a five-month high in September.
The Ministry of Statistics and Programme Implementation will release retail inflation data for September later today at 5.30 pm.
"In September, daily prices of 22 essential food items are up by 0.9 percent month-on-month on average vs -0.1 percent month-on-month in August," noted Kaushik Das, Deutsche Bank's chief economist.
"Based on all the available data, we have factored in 0.8 percent month-on-month sequential increase for food and beverages components in September... If food inflation surprises sharply to the upside, then it is possible for headline CPI inflation to rise closer to the earlier April peak of 7.8 percent," Das added.
CPI inflation had risen to a near eight-year high of 7.79 percent in April.
| ORGANISATION | ESTIMATE FOR SEPTEMBER CPI INFLATION |
| L&T Financial Services | 7.17% |
| ICRA | 7.2% |
| Sunidhi Securities | 7.24% |
| DBS Bank | 7.25% |
| IndusInd Bank | 7.27% |
| YES Bank | 7.29% |
| Barclays | 7.3% |
| Bank of Baroda | 7.3% |
| CareEdge | 7.3% |
| Kotak Mahindra Bank | 7.35% |
| Elara Capital | 7.38% |
| Deutsche Bank | 7.4% |
| Standard Chartered Bank | 7.4% |
| State Bank of India | 7.41% |
| HDFC Bank | 7.42% |
| IDFC First Bank | 7.48% |
| Nomura | 7.5% |
| Motilal Oswal Financial Services | 7.5% |
Food apart, an unfavourable base effect will also help push up inflation in September, to mark a third consecutive quarter, where it stays outside the 2-6 percent tolerance band and confirm the RBI's failure.
CPI inflation averaged 6.3 percent in January-March and 7.3 percent in April-June. A print of 7.3 percent in September will mean average inflation for July-September will be 7 percent.
The RBI's latest forecast says inflation will average 7.1 percent in July-September.
In the event of failure, the RBI must submit a report to the central government detailing the reasons for failure, remedial actions it proposes to take, and the time period within which inflation will return to target.
In the post-policy press conference on September 30, Governor Shaktikanta Das had said the Monetary Policy Committee (MPC) would meet to discuss the RBI's reply to the government.
"So, what we will write, I will not say. But as I have said earlier, we are expecting the inflation to come down close to the target over a two-year cycle, that was our expectation earlier and even now. But then again, there are so many uncertainties that are playing out and coming in from time-to-time," Das had added.
IIP growth
Separately, the statistics ministry will release industrial production data for August, also at 5.30 pm today.
Industrial growth, as measured by the Index of Industrial Production (IIP), is seen falling to a six-month low of 1.7 percent in August from 2.4 percent in July, according to the median of estimates by 16 economists polled by Moneycontrol.
| ORGANISATION | ESTIMATE FOR AUGUST IIP GROWTH |
| Deutsche Bank | 0.5% |
| YES Bank | 0.8% |
| DBS Bank | 1% |
| Standard Chartered Bank | 1% |
| HDFC Bank | 1.2% |
| Kotak Mahindra Bank | 1.6% |
| CareEdge | 1.7% |
| Nomura | 1.7% |
| Sunidhi Securities | 1.7% |
| Motilal Oswal Financial Services | 1.7% |
| State Bank of India | 1.8% |
| IndusInd Bank | 1.9% |
| ICRA | 2.8% |
| Bank of Baroda | 3.5% |
| Elara Capital | 4% |
| L&T Financial Services | 4.7% |
"Leading indicators saw mixed performance in August – while exports slipped into contraction zone and core sector growth slowed further to the lowest in nine months, auto production growth rose back to double digits on a year-on-year basis," noted Kanika Pasricha, an economist at Standard Chartered Bank.
Data released on September 30 showed India's eight core industries grew 3.3 percent in August, down from 4.5 percent in July.
The performance of core industries is key to industrial growth as they make up more than 40 percent of the IIP.
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