India inflation likely rose in August, snapping 3-month downtrend: Reuters poll

Despite the Indian government restricting wheat flour exports towards the end of last month, inflation – as measured by the CPI – likely rose to an annual 6.90 percent in August, compared with 6.71 percent in the prior month, the Sept. 5-8 Reuters poll of about 45 economists showed.

Forecasts for the data, due for release at 1200 GMT on September 12, ranged between 6.30 percent and 7.37 percent, with over a quarter of forecasters expecting 7.0 percent or above.

"Food prices have actually gone up for major cereals, pulses and vegetables on an annual basis because of the production challenges and shortfalls caused by a blistering heatwave," said Kunal Kundu, India economist at Societe Generale.

He also said erratic monsoon patterns across the country suggest there would be more crop damages, keeping food prices elevated in coming months.

The RBI’s own projections showed inflation staying above the 6 percent top end of its target range until early 2023.

The central bank was expected to hike the repo rate by another 60 basis points through the end of March to 6.00 percent from a pandemic-era record low 4.00 percent, a separate Reuters poll showed.

Interest rates are rising even as the economy is expected to slow sharply. At the same time, the RBI is spending billions of dollars a month in currency reserves to defend the weak rupee, which has been trading near record lows of around 80 per dollar for several months.