India’s Inflation Projected to Average 2.5% Over Next Six Months: HSBC Report
New Delhi : India’s inflation is expected to average around 2.5% over the next six months, according to a recent report by HSBC Global Research. The report attributes the moderation to a high base effect from the previous year, coupled with stable food prices and sufficient grain supplies.
Inflationary trends in June are already showing signs of easing compared to May, the report noted. While vegetable prices rose by 0-13% in the first 10 days of June, the high base from 2024 is helping to offset these gains.
The early onset of the monsoon this year has slowed recently, but sowing of key Kharif crops such as rice and pulses is progressing steadily. Aided by robust cereal production in the previous year, India’s food stocks remain ample. This has enabled the government to release grains gradually into the market, helping to keep food inflation under control over an extended period.
Headline inflation currently stands at 2.8%, with core inflation (excluding gold) at an estimated 3.5% year-on-year. Food prices continued in deflationary territory for the fifth consecutive month, falling 0.2% month-on-month. Prices of fruits, eggs, fish, meat, and sugar have remained subdued.
However, surging gold prices remain a concern, contributing to slightly elevated core inflation. With gold comprising 1.1% of the Consumer Price Index (CPI) basket and prices having surged over 30% in recent months, its impact is notable. Excluding gold, core inflation is relatively subdued, HSBC said.
Looking ahead, HSBC forecasts a further easing of core inflation in the latter half of 2025, contingent on an expected decline in gold prices. Other disinflationary forces such as a strengthening rupee, declining global commodity prices, and weakening demand from major economies like China are also likely to support the soft inflation outlook.
