A German brokerage on Friday warned that with the delayed monsoon, there was no scope for complacency on inflation even though official data for May had shown a cool-off. Deutsche Bank said that it expected the average Consumer Price Inflation (CPI) for FY24 to come to 5.2 per cent against the 5.1 per cent estimate of the Reserve Bank of India and the consensus 5 per cent for analysts. 

“...with monsoon rains currently being 53 per cent below normal, and given the history of food prices tending to shoot up in July following a poor start to monsoon, it is amply clear there is no scope for complacency at this stage as far as India’s inflation risks are concerned,” the brokerage said. 

The possibility of a 5 per cent or lower headline inflation could only play out if we were lucky and food prices did not rise in July and August, it added. 

July would be a key month as poor monsoon could drive a potentially sharp spike in July food price inflation, it said, adding that in the last two episodes of lower rainfall in 2009 and 2014, there were spikes in the month. 

The rainfall is 53 per cent below the normal so far, and the arrival of the southwest monsoon has been delayed across the country, leading to late sowing of the summer crop. 

Amid reports of tomatoes getting dearer, the brokerage said that the prices of key vegetables, such as onions, potatoes, and tomatoes, could also rise sharply in the coming months.