The CPI print sets the stage for another rate cut by the RBI in its June policy of 25 bps, they said.
The two vegetables, which account for 24 percent of the cost of a home-cooked meal, have been witnessing double-digit inflation
The overall CPI index has moved up from 147.2 in October 2019 to 196.8 in October 2024, an increase of a third in 5 years. And the Food & Beverage index has gone up by 40 percent over the period. Small wonder that the consumption of the masses has been hit
Onion prices were up 46 percent, while the potato was 51 percent higher compared with the previous year
"Inflation may plateau going further, especially the food part," the official said, adding that the steps that have been taken by both the central government and the RBI will likely keep a lid on inflation.
Even as the finance ministry expects CPI numbers to cool down going ahead, the government will continue to take more steps to contain inflation but avoid any knee-jerk reactions, Somanathan told Moneycontrol in an interview.
It is unlikely that the central bank will hike rates in the next few months, Gupta said.
Unseasonal rains, the resulting disruption in transportation and supply chains have affected the prices of a number of vegetables. Tomato prices are expected to touch Rs 300 a kg, but the government’s July 12 directive might provide some respite.
A 15-kg crate of tomatoes was sold for Rs 1,100 in Kolar wholesale APMC market on Sunday and this is expected to further drive up the price in the retail market in the city soon.
Prices of common vegetables have increased by 15-30 percent in recent weeks and unless there is rainfall within the next five to six days, rates are expected to rise further, a vendors body said.
Currently, Lahore and other cities of Punjab are getting the supply of tomatoes and onions from Afghanistan via the Torkham border.
Vegetable sellers say they are facing shrinking profits and reduced sales as due to the increased transportation cost and the ultimate hike in the buying price, they are bound to sell vegetables at a higher price, which means either a low margin for them or limited sales.
Overall food inflation rate also edged closer to 5 percent. It was 4.28 in February this year compared to 2.34 percent in the previous month and 0.95 percent in the same of last year.
Vegetables are supplied in Muhana mandi, Lal Kothi mandi and to other retail markets in the city from areas like Sanganer and Chomu (Jaipur). At present, farmers are not supplying to the mandis.
According to global financial services major HSBC over the next 12 months CPI inflation is expected to trend at or below 5 percent, which incidentally is RBI's upcoming target for inflation in early 2017.
This is going to be the last bi-monthly monetary policy to be decided by the central bank Governor as the broad-based 6-member panel may take over the job before the next review on October 4.
"The effect of normal monsoon on vegetable prices is yet to be felt. Once that happens, we hope the inflation trajectory will move downwards," Bhattacharya said in a foreword to a report by the bank's economic research wing.
SBI Research said if investigated a little further, it might be found that episodes of pulse and cereal price increase have been repeated every 2.2 years and thereafter.
The CPI has risen for the past 6 months from 3.7 percent to a 17-month high of 5.7 percent in January 2016. However, it is likely to decline in February led by food inflation mainly on easing seen in vegetable prices such as onions.
The company would offer the items at discounted rates at 30 supermarkets in Chennai, it said in a statement. One kg tomato priced at Rs 80-100 in the open market would be retailed at Rs 57.
The Reserve Bank is scheduled to unveil the fourth bi-monthly monetary policy review on September 30. Declining prices of vegetable and other food articles brought down wholesale inflation sharply to 3.74 percent in August to a nearly five-year low.
CNBC-TV18's Latha Venkatesh talks to Dr Pranob Sen, Chairman of the National Statistical Commission, Chetan Ahya MD & Chief Economist Asia Pacific at Morgan Stanley and A Prasanna, Chief Economist at ICICI Securities Primary Dealership Unit to find out their views on whether, even at 7.8 percent, the inflation battle is largely won.
Vegetable prices will lead the entire headline figure down to possibly 5.5 percent figure but the core WPI is expected to still be static at those 2.8 percent levels.
Industry chambers have pitched for lower interest rates to prop up growth. Industrial output in November contracted 2.1%, the worst performance in six months.
Falling vegetables prices is likely to drive inflation lower, according to economists. But while an interest rate hike is likely ruled out in January, given stubborn core inflation, experts are divided whether the RBI could cut rates in March even if headline inflation continues to fall.