Thursday February 15 2018
India Wholesale Inflation at 6-Month Low of 2.84%
Rida | rida@tradingeconomics.com

Wholesale prices in India rose by 2.84 percent year-on-year in January of 2018, after a 3.58 percent increase in the prior month and below market estimates of a 3.25 percent gain. It was the lowest wholesale inflation since July 2017, mainly due to softer rises in cost of food and fuel.

In January, cost of primary articles increased at a slower 2.37 percent (from 3.86 percent in December), mainly due to a 3.0 percent rise in cost of food (from 4.72 percent in a month earlier), namely vegetables (40.77 percent, compared to 56.46 percent). Meantime, cost of manufactured products rose 2.78 percent, following a 2.61 percent in the prior month, while cost of fuel and power went up 4.08 percet (after a 9.16 percent). 

On a monthly basis, wholesale prices increased by 0.1 percent, after a 0.5 percent fall in December 2017. 




Monday February 12 2018
India Inflation Rate Slows More than Anticipated
Joana Taborda | joana.taborda@tradingeconomics.com

Consumer prices in India increased 5.07 percent year-on-year in January of 2018, below a 17 month high of 5.21 percent in December and market expectations of 5.14 percent. Still, the inflation remained above 4.8 percent for the third month, the level not seen since July of 2016 and above 4 percent medium-term target of the Reserve Bank of India.

Cost went up at a slower pace for food and beverages (4.58 percent from 4.85 percent in December). The food index alone rose 4.7 percent, below 4.96 percent in the previous month. Inflation eased for vegetables (26.97 percent from 29.13 percent) and fruits (6.24 percent from 6.63 percent) while prices of pulses fell slightly less (-20.19 percent from -23.47 percent). Inflation was also slightly lower for fuel and light (7.73 percent from 7.9 percent).

On the other hand, prices went up faster for housing (8.33 percent from 8.23 percent) and clothing and footwear (4.94 percent from 4.8 percent).

The corresponding provisional inflation rates for rural and urban areas are 5.21 percent and 4.93 percent (5.27 percent and 5.09 percent respectively in December).




Wednesday February 07 2018
India Keeps Rates Unchanged
RBI | Joana Taborda | joana.taborda@tradingeconomics.com

The Reserve Bank of India kept its benchmark interest rate steady at 6 percent on February 7th 2018, matching market expectations. Policymakers reinforced the decision is consistent with a neutral stance of monetary policy aiming to reach the medium-term inflation target of 4 percent +/- 2 percent, while supporting growth. The central bank raised inflation forecasts to 5.1 percent for Q4 of the current fiscal year (January to March 2018) from 4.3-4.7 percent and GVA growth expectations were lowered to 6.6 percent for 2017-2018 from 6.7 percent. The reverse repo rate was also left on hold at 5.75 percent and the marginal standing facility rate and the Bank Rate at 6.25 percent.

Excerpts from the RBI Press Release:

The December bi-monthly resolution projected inflation in the range of 4.3-4.7 per cent in the second half of 2017-18, including the impact of increase in HRA. In terms of actual outcomes, headline inflation averaged 4.6 per cent in Q3, driven primarily by an unusual pick-up in food prices in November. Though prices eased in December, the winter seasonal food price moderation was less than usual. Domestic pump prices of petrol and diesel rose sharply in January, reflecting lagged pass-through of the past increases in international crude oil prices. Considering these factors, inflation is now estimated at 5.1 per cent in Q4, including the HRA impact.

The inflation outlook beyond the current year is likely to be shaped by several factors. First, international crude oil prices have firmed up sharply since August 2017, driven by both demand and supply side factors. Second, non-oil industrial raw material prices have also witnessed a global uptick. Firms polled in the Reserve Bank’s IOS expect input prices to harden in Q4. In a scenario of improving economic activity, rising input costs are likely to be passed on to consumers. Third, the inflation outlook will depend on the monsoon, which is assumed to be normal. Taking these factors into consideration, CPI inflation for 2018-19 is estimated in the range of 5.1-5.6 per cent in H1, including diminishing statistical HRA impact of central government employees, and 4.5-4.6 per cent in H2, with risks tilted to the upside. The projected moderation in inflation in the second half is on account of strong favourable base effects, including unwinding of the 7th CPC’s HRA impact, and a softer food inflation forecast, given the assumption of normal monsoon and effective supply management by the Government. 

Turning to the growth outlook, GVA growth for 2017-18 is projected at 6.6 per cent. Beyond the current year, the growth outlook will be influenced by several factors. First, GST implementation is stabilising, which augurs well for economic activity. Second, there are early signs of revival in investment activity as reflected in improving credit offtake, large resource mobilisation from the primary capital market, and improving capital goods production and imports. Third, the process of recapitalisation of public sector banks has got underway. Large distressed borrowers are being referenced for resolution under the Insolvency and Bankruptcy Code (IBC). This should improve credit flows further and create demand for fresh investment. Fourth, although export growth is expected to improve further on account of improving global demand, elevated commodity prices, especially of oil, may act as a drag on aggregate demand. Taking into consideration the above factors, GVA growth for 2018-19 is projected at 7.2 per cent overall – in the range of 7.3-7.4 per cent in H1 and 7.1-7.2 per cent in H2 – with risks evenly balanced. 




Monday January 15 2018
India WPI Rises Less than Expected in December
Office of the Economic Adviser l Rida Husna | rida@tradingeconomics.com

Wholesale prices in India rose by 3.58 percent year-on-year in December of 2017, following a 3.93 percent increase in the prior month. The figure came below market estimates of a 4 percent gain, mainly due to a slowdown in cost of food.

In December, cost of primary articles increased at a slower 3.86 percent (from 5.28 percent in November), mainly due to a 4.72 percent rise in cost of food (from 6.06 percent in a month earlier), namely vegetables (56.46 percent, compared to 59.80 percent). Meantime, cost of manufactured products rose 2.61 percent, the same as in the prior month, while cost of fuel and power went up 9.16 percet (after a 8.82 percent in the previous month). 

On a monthly basis, wholesale prices fell by 0.5 percent, after a 0.7 percent rise in a month earlier. 


Friday January 12 2018
India Inflation Rate Accelerates to 17-Month High of 5.21%
Joana Taborda | joana.taborda@tradingeconomics.com

Consumer prices in India increased 5.21 percent year-on-year in December of 2017, above 4.88 percent in November and market expectations of 5.1 percent. It is the highest inflation rate since July of 2016 amid faster rises in cost of food and housing.

Prices went up faster for food and beverages (4.85 percent from 4.41 percent in November). The food index alone rose 4.96 percent, above 4.42 percent in the previous month. Inflation accelerated for vegetables (29.13 percent from 22.48 percent) and fruits (6.63 percent from 6.19 percent) and prices of pulses fell slightly less (-23.47 percent from -23.53 percent). 

Also, prices went up faster for housing (8.25 percent from 7.36 percent). In contrast, the inflation slowed slightly for clothing and footwear (4.8 percent from 4.96 percent) and was nearly flat for fuel and light (7.9 percent from 7.92 percent).

The corresponding provisional inflation rates for rural and urban areas are 5.27 percent and 5.09 percent (4.79 percent and 4.9 percent respectively in November).

The central bank targets inflation at 4 percent with a tolerance band of ± 2 percent. It expects inflation to be between 4.3 percent-4.7 percent during the second half of the current fiscal year that ends in March.


Thursday December 14 2017
India Wholesale Inflation at 8-Month High of 3.93%
Office of the Economic Adviser l Rida Husna | rida@tradingeconomics.com

Wholesale prices in India rose by 3.93 percent year-on-year in November of 2017, following a 3.59 percent increase in the prior month and above market estimates of a 3.78 percent gain. It was the highest wholesale inflation since March, mainly due to a faster rise in cost of food and a further increase in cost of fuel.

In November, cost of primary articles increased at a faster 5.28 percent (from 3.33 percent in October), mainly due to a 6.06 percent rise in cost of food (from 4.03 percent in a month earlier), namely vegetables (59.80 percent, compared to 36.61 percent). Also, cost went up further for fuel and power (8.82 percent from 10.52 percent). Meantime, cost of manufactured products rose 2.61 percent, almost similar to the prior's month figure of 2.62 percent.  

On a monthly basis, wholesale prices rose by 0.7 percent, after a 1.0 percent gain in a month earlier.ure of 


Tuesday December 12 2017
India Inflation Rate at 15-Month High of 4.88%
Joana Taborda | joana.taborda@tradingeconomics.com

Consumer prices in India increased 4.88 percent year-on-year in November of 2017, higher than 3.58 percent in October and well above market expectations of 4.2 percent. It is the highest inflation rate since August of 2016, mainly due to rises in cost of vegetables and fuel.

Prices went up faster for food and beverages (4.41 percent from 2.26 percent in October). The food index alone rose 4.42 percent, above 1.9 percent in the previous month. Inflation accelerated for vegetables (22.48 percent from 7.47 percent) and fruits (6.19 percent from 5.05 percent) while prices of pulses fell more (-23.53 percent from -23.13 percent). 

Also, prices went up faster for housing (7.36 percent from 6.68 percent); fuel and light (7.92 percent from 6.36 percent) and clothing and footwear (4.96 percent from 4.76 percent).

The corresponding provisional inflation rates for rural and urban areas are 4.79 percent and 4.9 percent (3.36 percent and 3.81 percent respectively in October).


Wednesday December 06 2017
India Leaves Key Rate on Hold at 6%
RBI | Joana Taborda | joana.taborda@tradingeconomics.com

The Reserve Bank of India kept its benchmark interest rate steady at 6 percent on December 6th 2017, in line with market expectations. Policymakers said the decision is consistent with a neutral stance of monetary policy aiming to reach the medium-term inflation target of 4 percent +/- 2 percent, while supporting growth. However, the central bank showed concerns about inflationary risks, mainly due to higher prices for house rent allowances, food and fuel and raised its inflation forecasts for the second half of the current financial year to between 4.3 and 4.7 percent from the previous 4.2 percent to 4.6 percent. The gross value added growth projection was left unchanged at 6.7 percent. The reverse repo rate was also left on hold at 5.75 percent and the marginal standing facility rate and the Bank Rate at 6.25 percent

Excerpts from the RBI Press Release:

The October bi-monthly statement projected inflation to rise and range between 4.2-4.6 per cent in the second half of this year, including the impact of increase in house rent allowance (HRA) by the Centre. The headline inflation outcomes have evolved broadly in line with projections. Going forward, the inflation path will be influenced by several factors. First, moderation in inflation excluding food and fuel observed in Q1 of 2017-18 has, by and large, reversed. There is a risk that this upward trajectory may continue in the near-term. Second, the impact of HRA by the Central Government is expected to peak in December. The staggered impact of HRA increases by various state governments may push up housing inflation further in 2018, with attendant second order effects. Third, the recent rise in international crude oil prices may sustain, especially on account of the OPEC’s decision to maintain production cuts through next year. In such a scenario, any adverse supply shock due to geo-political developments could push up prices even further. Despite recent increase in prices of vegetables, some seasonal moderation is expected in near months as winter arrivals kick in. Prices of pulses have continued to show a downward bias. The GST Council in its last meeting has brought several retail goods and services to lower tax brackets, which should translate into lower retail prices, going forward. On the whole, inflation is estimated in the range 4.3-4.7 per cent in Q3 and Q4 of this year, including the HRA effect of up to 35 basis points, with risks evenly balanced. 

Q2 growth was lower than that projected in the October resolution. The recent increase in oil prices may have a negative impact on margins of firms and GVA growth. Shortfalls in kharif production and rabi sowing pose downside risks to the outlook for agriculture. On the positive side, there has been some pick up in credit growth in recent months. Recapitalisation of public sector banks may help improve credit flows further. While there has been weakness in some components of the services sector such as real estate, the Reserve Bank’s survey indicates that the services and infrastructure sectors are expecting an improvement in demand, financial conditions and the overall business situation in Q4. Taking into account the above factors, the projection of real GVA growth for 2017-18 of the October resolution at 6.7 per cent has been retained, with risks evenly balanced.

The MPC notes that the evolving trajectory needs to be carefully monitored. First, two of the key factors determining the cost of living conditions and inflation expectations, i.e., food and fuel inflation, edged up in November. Inflation expectations of households surveyed by the Reserve Bank have already firmed up and any increase in food and fuel prices may further harden these expectations. Second, rising input cost conditions as reflected in various surveys point towards higher risk of pass-through to retail prices in the near term. Third, implementation of farm loan waivers by select states, partial roll back of excise duty and VAT in the case of petroleum products, and decrease in revenue on account of reduction in GST rates for several goods and services may result in fiscal slippage with attendant implications for inflation. Fourth, global financial instability on account of the pace of/uncertainty over monetary policy normalisation in AEs and fiscal expansion in the US carry risks for inflation. The expected seasonal moderation in prices of vegetables, and fruits and the recent lowering of tax rates by the GST Council could mitigate upside pressures. 


Thursday November 30 2017
India GDP Growth Below Expectations in Q3
Joana Taborda | joana.taborda@tradingeconomics.com

The Indian economy expanded 6.3 percent yoy in Q3, above a 5.7 percent in Q2 which was the lowest in nearly 3 years, but below expectations of a 6.4 percent. A rebound in investment and inventories offset a slowdown in both private and public spending.

Gross fixed capital formation went up 4.7 percent, much faster than a 1.6 percent increase in the previous quarter and inventories jumped 6.7 percent, above 1.2 percent in the previous period. On the other hand, a slowdown was seen in household consumption (6.5 percent compared to 6.7 percent) and government spending (4.1 percent compared to 17.2 percent). Exports increased 1.2 percent, the same as in the previous period while imports rose at a much slower 7.5 percent (13.4 percent in the previous period). 

The Gross Value Added, that is, GDP excluding taxes, rose 6.1 percent year-on-year, above 5.6 percent in the three months to June. Faster expansion was reported for manufacturing (7 percent compared to 1.2 percent in the previous quarter), utilities (7.6 percent compared to 7 percent) and construction (2.6 percent compared to 2 percent) while mining recovered (5.5 percent compared to -0.7 percent). On the other hand, a slowdown was seen for trade, hotel, transport, communication & services related to broadcasting (9.9 percent compared to 11.1 percent); financial, insurance, real estate & professional services (5.7 percent compared to 6.4 percent) and agriculture, forestry & fishing (1.7 percent compared to 2.3 percent). 




Tuesday November 14 2017
India Wholesale Inflation at 6-Month High of 3.59%
Office of the Economic Adviser l Rida Husna | rida@tradingeconomics.com

Wholesale prices in India rose 3.59 percent year-on-year in October of 2017, following a 2.60 percent increase in the prior month and above market estimates of a 3.01 percent gain. It was the highest wholesale inflation since April, due to a surge in cost of food and a faster rise in cost of fuel.

In October, cost of primary articles increased at a faster 3.33 percent (from 0.15 percent in September), mainly due to a 4.30 percent rise in cost of food (from 2.04 percent in a month earlier), namely vegetables (36.61 percent compared to 15.48 percent). Also, cost increased more for fuel and power (10.52 percent from 9.01 percent). Meantime, cost of manufactured products rose less than in a month earlier (2.62 percent from 2.72 percent)  

On a monthly basis, wholesale prices rose  by 1.0 percent, after a 0.4 percent decline in a month earlier.