State Bank of India's (SBI) Ecowrap report has said that the country's consumer price index (CPI)-based inflation for December is expected to remain at an elevated level and range between 5 and 5.2 per cent. SBI in its report pointed that CPI inflation came in at 4.88 per cent in November 2017, surpassing the already high expectations of the market and for December 2017 as well the numbers are expected to remain elevated. It further projected CPI inflation to come in between 5-5.2 per cent.
However, the report also pointed that the higher rate of inflation is “primarily due to base effect” and said that “The average for Q3 FY18 will come around 4.5 per cent on yearly basis compared to 3 per cent in Q2 FY18, adding that “we expect the Q4 FY18 average at 4.8 per cent”. “Inflation for the Jan'18-Jun'18 period is likely to be on the higher side owing primarily to base effect (average inflation for Jan'17-Jun'17: 2.89 per cent).
The report added that some inflation numbers in the first half of 2018 could print over 5.5 per cent and this could be a source of negative surprise and it expects that on a net basis CPI inflation will remain modest in FY19 at 4.5 per cent. It had previously observed that inflation in Southern states is higher than other parts of the country mainly due to higher rural inflation over urban inflation.