India’s Inflation Could Increase if This Happens: Nomura Report

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India’s Inflation Could Increase if This Happens: Nomura Report

By Malvika Gurung

Investing.com -- As per the data provided by the National Statistical Office on October 13, the retail inflation measured by CPI , dropped to 4.35% in September 2021, from 5.3% in August. 

The sharp decline in retail inflation for the fifth consecutive month was backed by a significant price drop of some food items. However, rising prices of global commodities, majorly including crude oil , natural gas , and coal have added an undue increment in the prices of basic commodities in the country, which is a clear warning to the onset of inflation.

Japanese financial holding Nomura states in a research report that India could witness inflation of 1% if the prices of global commodities continue to surge.

Brent crude oil prices have surged by 30.7% in only 55 days to over $85/barrel, while prices of natural gas have surged by 26% compared to levels in August.

Economists predict that despite coal shortages in the country to resolve in the near future, rising energy costs would add to the inflationary pressure bubble.

Rising crude oil and power prices amid a constrained supply from OPEC+ could cause the headline inflation to rise by 6.5% by the next year, states a strategist at JM Financial (NS: JMSH ).

Nomura estimates that if the crude oil prices rise by 10%, India’s headline inflation will climb by about 30 basis points and would reduce the GDP by an estimated 20 basis points.

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