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INDIA: India Considering Cut to Food Weighting in CPI Basket

INDIA
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  • An Indian government panel tasked with revising the nation’s consumer price index is considering a substantial cut in the weighting of food, Bloomberg report citing a person familiar with the matter. The panel is discussing a proposal to reduce the weight of food in the consumer price basket by as much as 8ppts. The food and beverage category makes up 45.86% of the current CPI basket.
  • In June, food prices rose 9.36% Y/Y, pushing the headline figure to 5.08%. Excluding food and energy costs, inflation was 3.15%. In its previous policy statement, the RBI highlighted the persistence of inflationary pressures in food prices, with many sell-side analysts pointing to these pressures as a cause for concern moving forward.
  • We anticipate that at this week’s meeting the RBI remains on hold at 6.50%. This is likely to leave greater focus on the policy bias from the RBI. We see risks of the ‘withdrawal of accommodation’ stance being removed, but the August meeting might be too soon for such a shift. See our full preview of the decision, with sell-side analyst views, here.
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  • An Indian government panel tasked with revising the nation’s consumer price index is considering a substantial cut in the weighting of food, Bloomberg report citing a person familiar with the matter. The panel is discussing a proposal to reduce the weight of food in the consumer price basket by as much as 8ppts. The food and beverage category makes up 45.86% of the current CPI basket.
  • In June, food prices rose 9.36% Y/Y, pushing the headline figure to 5.08%. Excluding food and energy costs, inflation was 3.15%. In its previous policy statement, the RBI highlighted the persistence of inflationary pressures in food prices, with many sell-side analysts pointing to these pressures as a cause for concern moving forward.
  • We anticipate that at this week’s meeting the RBI remains on hold at 6.50%. This is likely to leave greater focus on the policy bias from the RBI. We see risks of the ‘withdrawal of accommodation’ stance being removed, but the August meeting might be too soon for such a shift. See our full preview of the decision, with sell-side analyst views, here.