Indian July consumer inflation likely edged higher on food prices: Reuters poll

By Pranoy Krishna

BENGALURU, Aug 7 (Reuters) - ‌Indian consumer inflation ​likely rose ​in July, notching a second consecutive month above the RBI's 4% medium-term target, as food prices edged higher, a Reuters poll showed.

Uneven rainfall across ‌the country this year has hampered agricultural output, driving food costs higher. ⁠Indian households spend over 40% of their budgets on food.

Still, inflation remained within the Reserve Bank of ‌India's (RBI) 2%-6% target range, so ‌the central bank kept interest rates unchanged this week, as was widely expected. The RBI flagged adverse weather-related events and uncertainty around global energy markets as key risks ​to its inflation outlook.

The August 5 to 7 Reuters poll of 40 economists forecast the inflation rate, measured by the annual change in the consumer price index (CPI), rose ⁠to 4.50% in July from 4.38% in June.

Forecasts for the data due on August 12 ranged from 3.96% to ​5.50%.

"Food inflation remains on an uptrend even as underlying price pressures stay subdued," said Kanika Pasricha, chief economic advisor at Union Bank of ​India.

"The improvement in monsoon activity during July though ‌supported crop conditions but did little to ease near-term supply concerns," she said.

While the price of crude oil was volatile during the month, ⁠she said "the absence of any meaningful revision in domestic retail fuel prices is expected to limit the pass-through to consumer inflation."

India's state-run fuel retailers raised petrol and diesel prices four times in ⁠May in response to rising costs due to the U.S.-Israeli war with Iran. While a brief pause ​in the conflict pushed global crude prices lower, they were still about 20% above pre-war levels.

Core inflation, which excludes volatile food and fuel components and better reflects underlying demand, is expected to have ‌been 4.08% in July. India does not publish official core inflation data.

Wholesale price index-based inflation likely remained elevated at 9.95% in July, ‌roughly unchanged from June levels.

The RBI expects inflation in this financial year to average 5.0%, lower ⁠than its previous estimate of 5.1%. ‌That was higher than ​the 4.8% predicted in a Reuters survey in July.

(Reporting by Pranoy Krishna; Polling by Susobhan Sarkar and Renusri K; Editing by Hari Kishan and ‌Christian Schmollinger)

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