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Tariff hikes by telcos to raise core inflation by 0.20% in FY25

The near-simultaneous tariff hikes of over 20 per cent by the country’s top three telcos will push up core inflation by 0.20 per cent in FY25, a foreign brokerage said on Wednesday.

Analysts at Deutsche Bank also upped their core inflation or the price rise, excluding food and fuel, by 0.20 per cent to 3.8 per cent.

Apart from the tariff hikes, the below-trend monsoon rains will be another factor that will be of focus from an inflation trajectory perspective, they said.

The report said the impact of telecom tariff hikes will start getting reflected from July, and the hikes will alone push the month-on-month core inflation by over 0.85 per cent month on month.

“Overall, core inflation will likely rise by 0.20 per cent in FY25 due to the telecom tariff hikes. Consequently, we revise our FY25 core inflation forecast to 3.8 per cent, from 3.6 per cent average earlier,” they added.

It can be noted that after a hiatus of over two and half years, the telcos announced a price hike of over 20 per cent, starting with largest operator Reliance Jio making the first move.

Ahead of the release of official data on price situation for June on July 12, the report said it expects the June core inflation to come at 3.2 per cent, which will be 0.13 per cent higher than the one in May.

The report said the headline consumer price inflation is expected to come at 4.96 per cent in June as against the 4.75 per cent in May.

The likely uptick in June CPI inflation closer to the 5 per cent mark, will be on account of higher food and beverages prices, particularly led by vegetables, it said.

The Reserve Bank of India (RBI), which is tasked with maintaining the number at 4 per cent, also expects fluctuations in the headline number during the course of the year and has been particularly pointing our concerns on the food inflation front. PTI

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