New Delhi, May 26
Low inflation for the rest of the year will result in improving real purchasing power of households and lowering input costs for corporates in India, an HSBC Research report said on Monday, adding that a less obvious, but equally important benefit, could be via fiscal finances.
The rest of the year will likely get support from lower inflation of about 2.5 per cent for the next six months.
With public granaries stocked up and monsoon rains likely to be favourable, food inflation is set to remain low. Core inflation as well will likely remain range-bound, led by weaker commodity prices, softer growth, a stronger rupee (against the US dollar), and imported disinflation from China, said the report, while updating its 100 indicators database for the country.
These indicators map various sectors, and gives a thorough and sequential picture of growth.
There are some pressures on the FY26 fiscal deficit target from lower-than-budgeted nominal GDP growth and direct tax buoyancy, and higher defence spending.
“However, there are offsetting factors as well, specifically a higher-than-budgeted RBI dividend (Rs 2.7 trillion). Most importantly, however, the option for the government to appropriate some of the fall in global oil prices by raising oil excise tax,” said the HSBC report.