Monday October 16 2017
India Wholesale Price Inflation Below Expectations
Office of the Economic Adviser l Rida Husna | rida@tradingeconomics.com

Wholesale prices in India rose 2.60 percent year-on-year in September of 2017, following a 3.24 percent increase in the prior month. The figure came in below market estimates of a 3.41 percent gain, mainly due to a slowdown in cost of food and fuel.

In September, cost of primary articles increased at a slower 0.15 percent (from 2.66 percent in August), mainly due to a 2.04 percent rise in cost of food (from 5.75 percent in a month earlier), namely vegetables (15.48 percent compared to 44.91 percent). Also, cost increased less for fuel and power (9.01 percent from 9.99 percent). Meantime, cost of manufactured products rose more than in a month earlier (2.72 percent from 2.45 percent)  

On a monthly basis, wholesale prices declined  by 0.4 percent, after a 0.8 percent gain in a month earlier.




Thursday October 12 2017
India Inflation Rate Unchanged in September
Joana Ferreira | joana.ferreira@tradingeconomics.com

India's consumer price inflation came in at increased 3.28 percent year-on-year in September 2017, unchanged from the previous month's five-month high and below market expectations of 3.6 percent. Food inflation slowed while prices rose at a faster pace for housing, fuel and clothing.

Prices went up at a slower pace for food and beverages (1.76 percent from 1.96 percent in August). The food index alone rose 1.25 percent, easing from a 1.52 percent gain in August. Inflation slowed for vegetables (3.92 percent from 6.16 percent) and fruits (5.14 percent from 5.29 percent) while cost of pulses fell less than in August (-22.51 percent from -24.43 percent). 

Meanwhile, prices went up faster for housing (6.10 percent from 5.58 percent in August); fuel and light (5.56 percent from 4.94 percent) and clothing and footwear (4.63 percent from 4.58 percent).

The corresponding provisional inflation rates for rural and urban areas are 3.15 percent and 3.44 percent (3.22 percent and 3.35 percent respectively in August).




Wednesday October 04 2017
India Leaves Key Rate at 7-Year Low of 6%
RBI | Joana Taborda | joana.taborda@tradingeconomics.com

The Reserve Bank of India kept its benchmark interest rate steady at 6 percent on October 4th 2017, following a 25bps cut in August and in line with market expectations. Policymakers said the decision is consistent with a neutral stance of monetary policy aiming to reach the medium-term target for inflation of 4 percent +/- 2 percent, while supporting growth. The central bank also increased its inflation forecasts for October-March to a range of 4.2 percent to 4.6 percent while the gross value added projection was cut to 6.7 percent from 7.3 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:

In August, headline inflation was projected at 3 percent in Q2 and 4.0-4.5 per cent in the second half of 2017-18. Actual inflation outcomes so far have been broadly in line with projections, though the extent of the rise in inflation excluding food and fuel has been somewhat higher than expected. The inflation path for the rest of 2017-18 is expected to be shaped by several factors. First, the assessment of food prices going forward is largely favourable, though the first advance estimates of kharif production pose some uncertainty. Early indicators show that prices of pulses which had declined significantly to undershoot trend levels in recent months, have now begun to stabilise. Second, some price revisions pending the goods and services tax (GST) implementation have been taking place. Third, there has been a broad-based increase in CPI inflation excluding food and fuel. Finally, international crude prices, which had started rising from early July, have firmed up further in September. Taking into account these factors, inflation is expected to rise from its current level and range between 4.2-4.6 per cent in the second half of this year, including the house rent allowance by the Centre.

As noted in the August policy, there are factors that continue to impart upside risks to this baseline inflation trajectory: (a) implementation of farm loan waivers by States may result in possible fiscal slippages and undermine the quality of public spending, thereby exerting pressure on prices; and (b) States’ implementation of the salary and allowances award is not yet considered in the baseline projection; an increase by States similar to that by the Centre could push up headline inflation by about 100 basis points above the baseline over 18-24 months, a statistical effect that could have potential second round effects. However, adequate food stocks and effective supply management by the Government may keep food inflation more benign than assumed in the baseline.

Turning to growth projections, the loss of momentum in Q1 of 2017-18 and the first advance estimates of kharif foodgrains production are early setbacks that impart a downside to the outlook. The implementation of the GST so far also appears to have had an adverse impact, rendering prospects for the manufacturing sector uncertain in the short term. This may further delay the revival of investment activity, which is already hampered by stressed balance sheets of banks and corporates. Consumer confidence and overall business assessment of the manufacturing and services sectors surveyed by the Reserve Bank weakened in Q2 of 2017-18; on the positive side, firms expect a significant improvement in business sentiment in Q3. Taking into account the above factors, the projection of real GVA growth for 2017-18 has been revised down to 6.7 per cent from the August 2017 projection of 7.3 per cent, with risks evenly balanced.




Thursday September 14 2017
Indian Wholesale Inflation at 4-Month High of 3.24% in August
Office of the Economic Adviser | Rida Husna | rida@tradingeconomics.com

Wholesale prices in India rose 3.24 percent year-on-year in August of 2017, following a 1.88 percent increase in the prior month and above market estimates a 3.0 percent gain. It was the highest wholesale inflation since April, due to a surge in prices of food and fuel.

In August, cost of primary articles jumped 2.66 percent (from 0.46 percent in July), mainly due to a 5.75 percent rise in cost of food (from 2.15 percent in a month earlier), namely vegetables (44.91 percent compared to 21.95 percent). In addition, cost increased more for: manufactured products (2.45 percent from 2.18 percent) and fuel and power (9.99 percent from 4.37 percent).

On a monthly basis, wholesale prices increased by 0.8 percent, after a 1.1 percent gain in a month earlier.

In May 2017, the government revised the base year to 2011-12 from 2004-05, aiming to align it with the base year of other indicators like the GDP and the industrial production index.


Tuesday September 12 2017
India Inflation Rate at 5-Month High in August
Joana Taborda | joana.taborda@tradingeconomics.com

Consumer prices in India increased 3.36 percent year-on-year in August of 2017, following a 2.36 percent rise in July and above market expectations of 3.2 percent. It is the highest inflation rate since March, due to a rebound in food prices. The Reserve Bank of India expects inflation at 2 percent - 3.5 percent in the first half of this fiscal year (April to September 2017) and at 3.5 percent - 4.5 percent in the second half (October 2017 to March 2018).

Prices went up at a faster pace for food and beverages (1.96 percent compared to 0.43 percent in July). The food index alone jumped 1.52 percent, recovering from a 0.29 percent drop in July. Prices surged for vegetables (6.16 percent compared to -3.57 percent) and fruits (5.29 percent compared to 2.83 percent) while cost of pulses fell slightly less (-24.43 percent compared to -24.75 percent). In addition, prices went up faster for housing (5.58 percent from 4.98 percent); fuel and light (4.94 percent compared to 4.86 percent in July) and clothing and footwear (4.58 percent compared to 4.22 percent).

The corresponding provisional inflation rates for rural and urban areas are 3.3 percent and 3.35 percent (2.41 percent and 2.17 percent respectively in July).


Thursday August 31 2017
India GDP Growth at Over 3-Year Low of 5.7% in Q2
Joana Taborda | joana.taborda@tradingeconomics.com

The Indian economy expanded 5.7 percent year-on-year in the second quarter of 2017, below 6.1 percent in the previous period and market expectations of 6.6 percent. It remains the weakest growth rate since the first quarter of 2014 due to a slowdown in consumer spending and exports. On the production side, manufacturing and agriculture eased. Figures for the second quarter of 2017 mark the third consecutive period of slowing growth, following the demonetization program started in November of 2016 that removed 86 percent of India's currency in circulation.

Year-on-year, lower growth rates were recorded for private spending (6.7 percent compared to 7.3 percent in the previous period); government consumption (17.2 percent compared to 31.9 percent) and exports (1.2 percent compared to 10.3 percent) while imports rose at a faster 13.4 percent (11.9 percent). On the other hand, gross fixed capital formation rose 1.6 percent, following a 2 percent drop in the first three months of the year.

The Gross Value Added, that is, GDP excluding taxes, increased 5.6 percent year-on-year in Q2 of 2017, the same as in the previous quarter. Mining and quarrying shrank 0.7 percent (+6.4 percent in the previous qurter) and slowdowns were recorded for manufacturing (1.2 percent compared to 5.3 percent); agriculture (2.3 percent compared to 5.2 percent) and public administration and defence (9.5 percent compared to 17 percent). On the other hand, faster increases were recorded for trade, hotels, transport and communication (11.1 percent compared to 6.5 percent); financial and real estate activities (6.4 percent compared to 2.2 percent) and utilities (7 percent compared to 6.1 percent).




Monday August 14 2017
India Inflation Rate Rises to 2.36% in July
Joana Ferreira | joana.ferreira@tradingeconomics.com

India's consumer prices increased 2.36 percent year-on-year in July 2017, beating market expectations of 1.87 percent and following a 1.54 percent gain in the previous month. Cost of housing, energy and clothing rose further and food prices fell at a softer pace.

Prices grew at a faster pace for: Fuel and light (4.86 percent from 4.54 percent), clothing and footwear (4.22 percent from 4.17 percent) and housing (4.98 percent from 4.7 percent).

Meanwhile, cost of food fell at a slower 0.29 percent after declining by 2.12 percent in June. While prices of vegetables fell less (-3.57 from -16.53 percent in June) and fruits inflation was higher (2.83 percent from 1.98 percent), cost of pulses declined further (-24.75 percent from -21.92 percent).

The corresponding provisional inflation rates for rural and urban areas are 2.41 percent and 2.17 percent (1.52 percent and 1.41 percent respectively in June).


Monday August 14 2017
India WPI Rises More than Expected in July
Office of the Economic Adviser l Rida Husna | rida@tradingeconomics.com

Wholesale prices in India rose 1.88 percent year-on-year in July of 2017, compared to a 0.9 percent rise in the prior month while market estimated a 1.3 percent rise. A surge in food prices offset a slowdown in cost of manufactured products and fuel.

In July, cost of primary articles increased by 0.46 percent (from -3.86 percent in June), mainly due to a 2.15 percent rise in cost of food (from -3.48 percent in a month earlier), namely vegetables (21.95 percent compared to -21.16 percent). Meantime, cost went up less for: manufactured products (2.18 percent from 2.27 percent) and fuel and power (4.37 percent from  5.28 percent).

On a monthly basis, wholesale prices increased by 1.1 percent, after declining 0.1 percent in a month earlier.

In May 2017, the government  revised the base year to 2011-12 from 2004-05, aiming to align it with the base year of other indicators like the GDP and the industrial production index.


Wednesday August 02 2017
India Cuts Key Rate to 6%
Reserve Bank of India | Joana Taborda | joana.taborda@tradingeconomics.com

The Reserve Bank of India lowered its benchmark interest rate by 25bps to 6 percent on August 2nd 2017, in line with market expectations. It is the first rate cut so far this year, bringing borrowing cost to the lowest since 2010 amid a sharp slowdown in inflation. The reverse repo rate was also lowered by 25bps to 5.75 percent and the marginal standing facility rate and the Bank Rate to 6.25 percent.

Excerpts from the RBI Press Release:

The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.

The second bi-monthly statement projected quarterly average headline inflation in the range of 2.0-3.5 per cent in the first half of the year and 3.5-4.5 per cent in the second half. The actual outcome for Q1 has tracked projections. Looking ahead, as base effects fade, the evolving momentum of inflation would be determined by (a) the impact on the CPI of the implementation of house rent allowances (HRA) under the 7th central pay commission (CPC); (b) the impact of the price revisions withheld ahead of the GST; and (c) the disentangling of the structural and transitory factors shaping food inflation. The inflation trajectory has been updated taking into account all these factors and incorporates the first round impact of the implementation of the HRA award by the Centre.

The MPC observed that while inflation has fallen to a historic low, a conclusive segregation of transitory and structural factors driving the disinflation is still elusive. In respect of inflation-sensitive vegetables, prices are recording spikes. Excess supply conditions continue to push down prices of pulses and keep those of cereals in check. The MPC will continue monitoring movements in inflation to ascertain if recent soft readings are transient or if a more durable disinflation is underway. In its assessment of real activity, the MPC noted that while the outlook for agriculture appears robust, underlying growth impulses in industry and services are weakening, given corporate deleveraging and the retrenchment of investment demand.

The MPC noted that some of the upside risks to inflation have either reduced or not materialised - (i) the baseline path of headline inflation excluding the HRA impact has fallen below the projection made in June to a little above 4 per cent by Q4; (ii) inflation excluding food and fuel has fallen significantly over the past three months; and, (iii) the roll-out of the GST has been smooth and the monsoon normal. Consequently, some space has opened up for monetary policy accommodation, given the dynamics of the output gap. Accordingly, the MPC decided to reduce the policy repo rate by 25 basis points. Noting, however, that the trajectory of inflation in the baseline projection is expected to rise from current lows, the MPC decided to keep the policy stance neutral and to watch incoming data. The MPC remains focused on its commitment to keeping headline inflation close to 4 per cent on a durable basis.


Friday July 14 2017
India Wholesale Inflation At 11-Month Low Of 0.9% In June
Office of the Economic Adviser | Rida Husna | rida@tradingeconomics.com

Wholesale prices in India rose 0.9 percent year-on-year in June of 2017, compared to a 2.17 percent rise in May and below market estimates of a 1.6 percent rise. It was the lowest wholesale inflation since July of 2016, as cost of manufactured products and fuel went up at a slower pace and food prices fell further.

In June, cost increased at a slower pace for: manufactured products (2.27 percent from 2.55 percent in the prior month) and fuel and power (5.28 percent from 11.7 percent). In addition, prices of primary articles fell 3.86 percent (from -1.79 percent), mainly due to a 3.47 percent drop in cost of food (-2.27 percent in May), namely vegetables (-21.16 percent compared to -18.51 percent). 

On a monthly basis, wholesale prices decreased by 0.1 percent, after falling 0.4 percent in a month earlier.

In May 2017, the government  revised the base year to 2011-12 from 2004-05, aiming to align it with the base year of other indicators like the GDP and the industrial production index.