By Anant Chandak and Rahul Trivedi
BENGALURU (Reuters) - India's retail inflation in September likely overshot the Reserve Bank of India's (RBI) 4% medium-term target for the first time since July due to a persistent rise in vegetable prices and a lower year-ago base, a Reuters poll found.
Food items, especially vegetables and other perishables, which make up a significant share of overall household spending in the country, saw an uptick in prices as heavy rains reduced the availability of essential crops.
A high base from last year, which helped bring down inflation in July and August, became a lower base last month, having the opposite effect.
The Oct. 3-9 Reuters poll of 48 economists predicted retail inflation as measured by the consumer price index (CPI) jumped to 5.04% in September from a year ago from 3.65% in August. Forecasts ranged from 3.60% to 5.40%.
The data will be released on Oct. 14 at 1200 GMT.
"September's reading will bear the brunt of a persistent spike in vegetable prices, especially tomatoes and onions .... Even edible oil prices are witnessing momentum due to an increase in international prices. All these concomitantly might put upside pressure on headline inflation," said Dipanwita Mazumdar, an economist at Bank of Baroda.
"Further, in terms of the statistical base as well, Q3 doesn't have an advantage," she added.
A separate Reuters poll showed inflation averaging 4.6% this quarter and 4.5% this fiscal year, above the central bank's 4% target.
Meanwhile, core inflation, which strips out volatile items such as food and energy, was expected to rise to 3.50% in September from 3.30% in August, partly due to telecom tariff hikes and higher gold prices.
"We see the persistent weakness in core CPI as a sign of growing economic slack, which is also mirrored in rising discounts on motor vehicles, and recent earnings from (fast moving consumer goods) companies also indicate lack of pricing power," said Rahul Bajoria, head of India and ASEAN economic research at Bank of America.
Benign core inflation could give the RBI, which left interest rates unchanged on Wednesday, room to start cutting in December. Most major central banks, including the U.S. Federal Reserve, have already started an easing cycle.
"By the time RBI meets in December, they'll have at least a month minimum of good food price data ...(and) the Fed may have cut by 75 basis points. In that backdrop the RBI will find space to ease policy with a very shallow rate cut cycle," said Gaura Sengupta, chief economist at IDFC Bank.