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Experts' take on IIP data and retail inflation

"The monsoon is expected to be normal to above normal in 2016, going forward we expect inflationary risk to diminish at a rapid pace, giving more elbow room to the RBI and govt to focus on growth," said expert.

twitter-logo Reuters        Last Updated: April 13, 2016  | 07:53 IST
Experts' take on IIP data and retail inflation
Photo: Reuters

India's annual consumer inflation eased for the second straight month to 4.83 per cent in March, helped by smaller rises in food prices, government data showed on Tuesday.

Economists surveyed by Reuters had forecast retail inflation would slow to 5 per cent in March from an upwardly revised 5.26 per cent in February.

Data on Tuesday also showed industrial output grew at an annual rate of 2.0 per cent in February, compared with a 1.5 per cent year-on-year contraction in January.

ALSO READ: IIP rebounds, retail inflation hits 6-month low

COMMENTARY

RUPA REGE NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCE HOLDINGS, MUMBAI

"The primary contribution to moderating CPI is sustained moderation in food prices for the last three months. Also, statistical base effect continues to remain favourable.

"In view of the fact that the monsoon is expected to be normal to above normal in 2016, going forward we expect inflationary risk to diminish at a rapid pace, giving more elbow room to the RBI and the government to focus on growth concerns."

MADHAVI ARORA, ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI

"Core inflation is directionally in sync with the headline number, which should be pleasing for the RBI.

"Going ahead the above normal monsoon forecast should augur well for agricultural production, and thus, there are downside risks to inflation estimates as far as food inflation is concerned. So, that should again augur well for the inflation trajectory going ahead.

"We are looking at an average of 4.8-4.9 per cent this year."

SOUMYA KANTI GHOSH, CHIEF ECONOMIC ADVISER, STATE BANK OF INDIA, MUMBAI

"I now expect inflation to be significantly below 5 per cent for most part of the year because of favourable base effect and declining food prices, specifically, pulses.

"I expect inflation to be in 4.0-4.5 per cent band which will mean that RBI can cut rates by up to 50 basis points more."

ANJALI VERMA, ECONOMIST, PHILLIPCAPITAL INDIA LTD, MUMBAI

"CPI is better than expected with across-the-segment improvement. However, the biggest surprise was from month-on-month fall in fuel inflation versus our expectation of a rise.

"Overall, we are retaining our expectation of another 25 basis point rate cut by the RBI going ahead on the back of easing inflation.

"The risk going ahead could come from commodities, but with the forecast of normal monsoon, inflation worries are expected to be contained."

SHILAN SHAH, INDIA ECONOMIST, CAPITAL ECONOMICS, SINGAPORE

"Inflation is now below the RBI's 5 percent target for March 2017. Alongside last week's cut in the repo rate, this may fuel talk of further monetary loosening. However, we still think that the RBI has a tough task in meeting its inflation targets.

"One factor that is likely to add to inflation over the coming months is that fuel inflation is set to rise as the deflationary impact of lower global oil prices continues to reverse.

"In addition, as the RBI alluded to in last week's policy statement, there is a risk that food and energy inflation will spike over the coming months if, as has been the case in the past two years, the monsoon rains are weak again this time round.

"Finally, there are reasons to think that the finance ministry will be forced to relax its budget deficit targets over the coming months. A looser fiscal stance could boost inflation expectations, which have already been rising of late.

"In terms of what this all means for policy, we still expect the repo rate to remain on hold at 6.50 percent for the rest of 2016 and 2017."

SHUBHADA RAO, CHIEF ECONOMIST, YES BANK, MUMBAI

"Momentum is looking lower. The core inflation is lower with 24 bps month-on-month decline. Although we expect some of the food price momentum to pick up in coming 2-3 months, outlook for monsoon being favourable should be adequate to offset interim price pressure on food.

"Overall inflation trajectory appears to be well within RBI's indicative target for March, and as such, we expect a 25 bps rate cut as early as June.

"If food inflation surprises on a significant downside on RBI's target by 50 bps by March, further rate cuts cannot be ruled out."

A PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP, MUMBAI

"The downside surprise from food inflation has sustained. If monsoon turns out good, then some disinflation in pulses will continue. However, services inflation remains sticky, which will prevent inflation from sustaining below 5 percent.

"In terms of monetary policy we do not expect any action from the RBI as inflation has to consistently print below 5 percent for the central bank to be convinced that its inflation target will be achieved. Inflation excluding petrol still remains sticky at 5.1 percent.

"IIP (industrial output) number is definitely positive but capital goods output continues to be disappointing which raises a question mark on the sustainability of the recovery unless investment demand picks up."

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