India’s consumer inflation continued to ease in June, hitting a lower-than-expected 2.10%, government data showed on Monday.
The headline inflation rate extended its slide after dropping to a more than six-year low in May as growth in food prices continued to decline. Economists polled by Reuters had forecast June inflation at 2.5%.
The consumer price index dropped for an eighth straight month in June.
Food inflation came in at -1.06% in June, compared with 0.99% in May.
Inflation data offers more room to the Reserve Bank of India to continue relaxing its monetary policy, after its outsized rate cut of 50 basis points in May.
RBI Governor Sanjay Malhotra said in May that record wheat production and a higher harvest of key pulses in the spring crop season “should ensure adequate supply of key food items,” raising the prospects of a further decline in food inflation.
“Aided by a good weather outcome, we expect inflation to average about 2.5% over the next six months. A high base over the last three years and strong cereal production will help keep food inflation lower for longer,” HSBC said in a note on June 30.
“A good monsoon will help contain inflation, boost real wages, and raise the purchasing power of informal sector consumers,” HSBC said.
The increase in domestic consumption would accelerate India’s economy after it posted a faster-than-expected growth of 7.4% in the quarter ended March.
Malhotra, however, has warned that the country needs to be watchful of weather-related uncertainties, as well as concerns around tariffs and their impact on global commodity prices.
India has been negotiating with the U.S. to strike a trade deal before President Donald Trump’s tariff deadline of Aug. 1, failing which the country would invite import duties of 26%.
Indian media reported last week that a trade delegation was expected to travel to Washington for talks, after Trump restarted sending out tariff letter to countries early last week.
New Delhi earlier this month proposed retaliatory duties against the U.S. at the World Trade Organization, Reuters reported, saying Washington’s 25% tariff on automobiles and some auto parts would affect $2.89 billion of India’s exports.
Source: CNBC