Consumer inflation likely eased to 5.3% in Dec on modest food prices: Poll

Consumer price inflation in India likely fell to 5.3 per cent in December on moderating food price rises, a Reuters poll of economists showed, bolstering expectations for an interest rate cut by the central bank next month amid slowing economic growth.

Food prices, which make up nearly half of the country's consumer price index (CPI) basket, have kept inflation elevated in recent months, largely driven by a sustained surge in vegetable prices, which have risen mostly by double-digits for a year.

However, they have started to ease thanks to a bumper summer crop harvest supported by favourable monsoons, offering hope for further moderation in coming months.

The Jan. 6-9 Reuters poll of 43 economists showed inflation as measured by the annual change in the consumer price index (CPI) fell to 5.30 per cent in December from 5.48 per cent in November.

Estimates for the data, set to be released on Jan. 13 at 1030 GMT, ranged from 4.50 per cent to 5.60 per cent.

"The slow pace of easing in inflation is attributed to a delayed correction in vegetable prices given unseasonal rains in October and upward momentum seen in other food sub-segments like edible oils, cereals, with some cooling seen in December," wrote Kanika Pasricha, chief economic adviser at Union Bank of India.

Core inflation, which excludes volatile items such as food and energy and is seen as a better gauge of domestic demand, was forecast to be 3.70 per cent in December, according to the median estimate from a smaller sample of 17 economists.

The Indian statistics agency does not publish core inflation data. Economists estimated it was between 3.64 per cent and 3.70 per cent in November.

While price rises have eased modestly, inflation is not expected to return to the central bank's 4 per cent medium-term target at least until the second half of 2026, a separate Reuters poll showed.

A majority of economists in a survey taken last month, before Sanjay Malhotra was appointed as Reserve Bank of India (RBI) Governor to replace Shaktikanta Das, showed the central bank will cut its key interest rate by 25 basis points to 6.25 per cent at the Feb. 5-7 policy meeting.

This would be mainly to support the economy, which was growing around 7-8 per cent but slowed to just above 5 per cent in the July-September quarter.

"We continue to expect a rate cut from the RBI in Feb with growth likely to undershoot the RBI's 6.6 per cent forecast," Teresa John, deputy head of research and economist with Nirmal Bang Institutional Equities, wrote in a note.

Wholesale price index-based inflation is expected to have surged to 2.30 per cent last month from 1.89 per cent in November, the survey also showed.