CPI, WPI Inflation Likely To Average At 5.4% And 2-3% In FY2024: Report

The consumer price index (CPI) and wholesale price index (WPI) inflation is expected to average at 5.4 per cent and 2-3 per cent, respectively in FY2024, however, upside risks emanate from food items amid possible El Nino occurrence, said rating agency ICRA.

The rating agency estimates the CPI inflation to average at 6.7 per cent in FY2023, before recording a base-effect-led dip to 5.4 per cent in FY2024. 

"There was a relatively larger step-up in prices of some services in the post-pandemic period, following the reopening in the economy," it stated.

However, annual changes in the services segment are likely to be of a smaller quantum going ahead, which may lead to some tempering in the core inflation in FY2024. 

Nevertheless, ICRA remains circumspect regarding the evolving impact of the feared El Nino on food inflation.

The rating agency also expects the WPI inflation to average at an elevated 9.5 per cent in FY2023 and moderate thereafter to 2-3 per cent in FY2024, largely on account of the base effect related to commodity prices. 

A likely return of El Nino in the summer season poses upside risks to our estimates for FY2024, it stated.

In India, the CPI inflation softened to 6.4 per cent in February 2023 from 6.5 per cent in January 2023. The core-WPI inflation declined to a 28-month low of 2.1 per cent in February 2023 from 2.8 per cent in January 2023.

"With two consecutive CPI inflation prints above-6.0 per cent during Jan-Feb 2023, the Monetary Policy Committee (MPC) is likely to vote for another non-unanimous rate hike in Apr 2023, following the recent rate hike by the US Fed," it added.