Despite slow growth, households expect inflation to remain in double digits for the sixteenth consecutive quarter due to rising food prices, says Nomura in its research note on inflation
Households’ inflation expectations have risen sharply in Q3 2013. The Reserve Bank of India's (RBI's) latest survey shows that households expect the mean inflation expectation to rise from 11.8% in Q3 2013 to 12.8% in three months and to 13.5% in a year. This is according to a research note on inflation by Nomura.
The rise in expectations is mainly influenced by the persistently high price of food products. However, on a 3-month-ahead period, households expect price pressures to continue across the board, with prices likely to rise for non-food products, household durables, housing and the cost of services, says Nomura’s forecast.
The significant spike in vegetable prices during Q3 2013 may have played a key role in boosting inflation expectations, implying that expectations may partly be adaptive in India, points out Nomura.
With data from RBI, CEIC and Nomura Global Economics the following chart shows the inflation expectation trend in the country. The Inflation Expectations Survey of Households captures the inflation expectations of 4,765 urban households across 16 cities.