IANS New Delhi

India inflation is likely to average around 2.5 per cent for the next six months, lower than the RBI's forecast of 3.5 per cent, an HSBC report said on Friday. The June inflation print is trending a tad lower than May levels. "We think that the low inflation print can be attributed to the high base of last year. Vegetable prices in the first 10 days of June have risen in the range of 0-13 per cent," according to HSBC Global Research.

The monsoon season started early, but the rains have slowed since. That said, sowing of the summer crop is progressing well, particularly for rice and pulses. This, along with a strong cereal production from last year means that granaries are full and the government can choose to slow release stocks to control cereal inflation over a 2-year horizon, the report noted.

At 2.8 per cent, headline and core inflation (excluding gold) are well below the central bank's 4 per cent target, while food prices continue to fall. Food prices remained in deflation for a fifth month, down 0.2 per cent (month-on-month). The sequential momentum in the prices of fruits, egg, fish, meat, and sugar were benign too.

Higher gold prices keep core inflation elevated. Gold has a weight of 1.1 per cent in the CPI basket, and its price has been rising 30 per cent+ in recent months. Excluding gold, core inflation came in at 3.5 per cent YoY.