LPG cut to cool inflation by 10-30 bps this fiscal: Experts
inflation by 10-30 basis points (bps), with a 20-30 basis points decline in September alone, according to economists. Inflation is likely to fall below 6% in September, they said.
A basis point is a hundredth of a percentage point.
«Our September estimate assumes a further decline in tomato prices and incorporates the impact of LPG price cut,» said Gaura Sengupta, economist, IDFC First Bank, forecasting 5.6% inflation in September. Paras Jasrai, senior analyst, Ind-Ra, pegged the annual impact of inflation at 10-20 bps.
«The new measure would be especially helpful for the lower income strata which is battling high food inflation,» he said.
On the other hand, Madan Sabnavis, chief economist, Bank of Baroda, said the impact of LPG price cut on inflation could be 0.26 bps.
An ET analysis shows that LPG prices were cooling off even before the cut. Inflation in LPG had dropped down to 4.9% in July, compared with 11.8% in the April-June quarter and 18.3% in 2022-23.
The government on Tuesday slashed LPG prices by ₹200 per cylinder for all customers, making gas cylinders cheaper by ₹400 for beneficiaries under the Ujjwala Yojana.
Inflation concerns remain
Inflation had climbed to 7.4% in July, breaching the Reserve Bank of India's (RBI) upper tolerance band of 6% for the first time this year. Economists indicate that it is likely to do so again in August.
An ET poll of 17 economists last week pegged the median inflation forecast for 2023-24 at 5.5%, higher than the RBI's estimate of 5.4%.
However, economists said there are upside risks to inflation.
«The risk to our inflation estimate is from uneven monsoon performance, with August rainfall deficit tracking at a historical high.
