Retail Prices To Drop? Morgan Stanley, Reuters Poll Project Drop In Inflation - Details

India’s Consumer Price Index (CPI) inflation is likely to ease to 5.4 per cent in November 2024, according to a forecast by Union Bank.

The decrease is attributed to a fall in vegetable prices, which have seen significant volatility in recent months. This expected drop comes after inflation surged to a 14-month high of 6.21 per cent in October, largely driven by a sharp rise in vegetable costs.

Morgan Stanley Predicts a Moderation

Global financial services firm Morgan Stanley also forecasts a decline in inflation, predicting a drop to 5.5 per cent in November from 6.2 per cent in October. The firm cites the moderation of food prices as a key factor in this easing. Despite this, Morgan Stanley notes that core inflation, which excludes food and fuel, is expected to inch up, while fuel prices continue their downward trend.

“We expect CPI inflation to edge downwards to 5.5 per cent in November, helped by a moderation in food prices, even as core inflation ticks up and fuel prices continue to decline,” Morgan Stanley said in a report.

According to a Reuters poll of economists, retail inflation is expected to fall to 5.53 per cent in November, largely due to the arrival of fresh produce in markets, which has helped alleviate the pressure from soaring vegetable prices. October’s inflation spike was driven in part by the fastest rise in vegetable prices in nearly four years.

In addition to food price fluctuations, the imposition of an additional import duty on edible oils in September contributed to increased inflationary pressures, further complicating the inflationary outlook.

Wholesale Price Index Inflation to Moderate

Wholesale Price Index (WPI) inflation is also expected to ease to 2.20 per centin November, down from 2.36 per cent in October. This marks a continuation of the trend of moderating price pressures at the wholesale level, although food-related costs remain a key determinant in both CPI and WPI inflation trajectories.

Official Data Due on December 12

India’s official CPI data, to be released by the statistics agency on December 12, will offer more clarity on the inflation outlook. As the country grapples with both food price volatility and broader economic challenges, inflation remains a key issue for policymakers, businesses, and consumers alike.