Wednesday August 14 2019
India Wholesale Inflation Slows to Over 2-Year Low
Office of the Economic Advisor | Rida Husna | rida@tradingeconomics.com

Wholesale prices in India rose by 1.08 percent year-on-year in July 2019, slowing from a 2.02 percent gain in the previous month and missing market expectations of 1.93 percent. It was the lowest wholesale inflation rate since June 2017.

Manufacturing inflation, which contributes around 64 percent to the wholesale price index, slowed to 0.34 percent in July from 0.94 percent in June, as prices increased at a softer rate for chemical & chemical products (0.42 percent vs 1.45 percent), textiles (1.36 percent vs 2.67 percent), and wood and products of wood and cork (1.36 percent vs 1.43 percent). In addition, prices fell for both rubber and plastics (-0.27 percent vs 0.18 percent) and basic metals (-4.28 percent vs -3.72 percent).

Prices of primary articles advanced 5.03 percent, compared to 6.72 percent a month earlier, as cost of food articles rose less (6.15 percent vs 6.98 percent in June), in particular vegetables (10.67 percent vs 24.76 percent), pulses (20.08 percent vs 23.06 percent) and milk (0.28 percent vs 0.91 percent). On the other hand, there were declines in sugar cost (-0.94 percent vs 4.01 percent) and potato prices (-23.63 percent vs -24.27 percent).

Meanwhile, wholesale prices of fuel products, including petrol, diesel and cooking gas, fell further (-3.64 percent vs -2.20 percent).

On a monthly basis, wholesale prices fell by 0.2 percent in July, following a 0.2 percent gain in June.




Tuesday August 13 2019
India Inflation Rate Below Forecasts
MOSPI | Joana Ferreira | joana.ferreira@tradingeconomics.com

India's retail price inflation rate stood at 3.15 percent year-on-year in July 2019, little-changed from the previous month's 3.18 percent and slightly below market expectations of 3.20 percent. Inflation remained below the Reserve Bank of India's medium-term target of 4 percent for the twelfth consecutive month, despite recent interest rate cuts.

Food prices rose 2.36 percent from a year earlier in July, the biggest gain since June 2018. Also, the food & beverages index went up 2.33 percent, with main upward pressure coming from: meat & fish (9.05 percent); vegetables (2.82 percent); non-alcoholic beverages (3.38 percent); prepared meals, snacks, sweets etc. (2.56 percent); pulses & products (6.82 percent); egg (0.57 percent); cereals & products (1.31 percent); spices (2.02 percent); oils & fats (0.91 percent); and milk & products (0.98 percent). By contrast, fruits prices dropped 0.86 percent and sugar & confectionery costs fell 2.11 percent.

Among non-food products, prices increased for housing (4.87 percent); miscellaneous (4.65 percent); pan, tobacco and intoxicants (4.89 percent); and clothing and footwear (1.65 percent). Fuel & light prices were 0.36 percent lower.

The corresponding provisional inflation rates for rural and urban areas were 2.19 percent and 4.22 percent, compared with June's figures of 2.21 percent and 4.33 percent respectively.

On a monthly basis, consumer prices went up 0.91 percent in July.




Wednesday August 07 2019
RBI Cuts Interest Rates by 35bps
Reserve Bank of India | Chusnul Ch Manan | chusnul@tradingeconomics.com

The Reserve Bank of India lowered its benchmark repo rate by 35 bps to 5.40 percent during its August meeting, while markets had forecast a smaller 25bps cut. This was the fourth straight rate cut so far this year, in an attempt to boost economic growth while the inflation outlook remains benign.

Excerpts from the RBI policy statement:

In the second bi-monthly monetary policy resolution of June 2019, CPI inflation was projected at 3.0-3.1 per cent for H1:2019-20 and 3.4-3.7 per cent for H2:2019-20, with risks broadly balanced. The actual headline inflation outcome for Q1:2019-20 at 3.1 per cent was in alignment with these projections. 18.
 
The baseline inflation trajectory for the next four quarters will be shaped by several factors. First, the uptick in food inflation may be sustained by price pressures in vegetables and pulses as more recent data suggest. Uneven spatial and temporal distribution of monsoon could exert some upward pressure on food items, though this risk is likely to be mitigated by the recent catch up in rainfall. Second, despite excess supply conditions, crude oil prices may likely remain volatile due to geo-political tensions in the Middle-East. Third, the outlook for CPI inflation excluding food and fuel remains soft. Manufacturing firms participating in the industrial outlook survey expect output prices to ease in Q2. Fourth, one year ahead inflation expectations of households polled by the Reserve Bank have moderated. Taking into consideration these factors and the impact of recent policy rate cuts, the path of CPI inflation is projected at 3.1 per cent for Q2:2019-20 and 3.5-3.7 per cent for H2:2019-20, with risks evenly balanced. CPI inflation for Q1:2020-21 is projected at 3.6 per cent.  
 
In the MPC’s June resolution, real GDP growth for 2019-20 was projected at 7.0 per cent – in the range of 6.4-6.7 per cent for H1:2019-20 and 7.2-7.5 per cent for H2 – with risks evenly balanced. Various high frequency indicators suggest weakening of both domestic and external demand conditions. The Business Expectations Index of the Reserve Bank’s industrial outlook survey shows muted expansion in demand conditions in Q2, although a decline in input costs augurs well for growth. The impact of monetary policy easing since February 2019 is also expected to support economic activity, going forward. Moreover, base effects will turn favourable in H2:2019-20. Taking into consideration the above factors, real GDP growth for 2019-20 is revised downwards from 7.0 per cent in the June policy to 6.9 per cent – in the range of 5.8-6.6 per cent for H1:2019-20 and 7.3- 5 7.5 per cent for H2 – with risks somewhat tilted to the downside; GDP growth for Q1:2020-21 is projected at 7.4 per cent.
 
The MPC notes that inflation is currently projected to remain within the target over a 12-month ahead horizon. Since the last policy, domestic economic activity continues to be weak, with the global slowdown and escalating trade tensions posing downside risks. Private consumption, the mainstay of aggregate demand, and investment activity remain sluggish. Even as past rate cuts are being gradually transmitted to the real economy, the benign inflation outlook provides headroom for policy action to close the negative output gap. Addressing growth concerns by boosting aggregate demand, especially private investment, assumes the highest priority at this juncture while remaining consistent with the inflation mandate.




Monday July 15 2019
India Wholesale Inflation Slows to 2-Year Low
Office of the Economic Advisor | Rida Husna | rida@tradingeconomics.com

Wholesale prices in India rose by 2.02 percent year-on-year in June 2019, easing from a 2.45 percent gain in the previous month and below market expectations of 2.35 percent. It was the lowest wholesale inflation rate since July 2017, amid a slowdown in cost of manufactured products and a marked decline in fuel prices.

Manufactured products inflation eased to 0.94 percent in June from 1.28 percent in May, amid a slowdown in cost of chemical & chemical products (1.45 percent vs 1.96 percent), textiles (2.67 percent vs 3.46 percent), and rubber and plastics (0.18 percent vs 0.65 percent); and a further drop in prices of basic metals (-3.72 percent vs -2.23 percent). Meantime, cost of wood and of products of wood and cork rose faster (1.43 percent vs 0.67 percent).

In addition, cost of fuel & power fell by 2.2 percent, reversing a 0.98 percent advance a month earlier.

Meanwhile, prices of primary articles advanced 6.72 percent, faster than 6.16 percent in May, as cost of food articles continued to rise (6.98 percent vs 6.99 percent in May), namely vegetables (24.76 percent vs 33.15 percent), cereals (7.93 percent vs 7.9 percent), wheat (5.38 percent vs 6.35 percent), fruits (1.87 percent vs -3.51 percent), and milk (0.91 percent vs 1.13 percent). Conversely, potato prices fell further (-24.27 percent vs -23.36 percent).

On a monthly basis, wholesale prices increased by 0.2 percent in June, the same pace as in May.


Friday July 12 2019
India Inflation Rate Rises to 8-Month High
MOSPI | Joana Ferreira | joana.ferreira@tradingeconomics.com

India's retail price inflation rate rose to 3.18 percent year-on-year in June 2019, the highest since last October, from 3.05 percent in the previous month and slightly below market expectations of 3.20 percent. Food prices were the biggest contributor to the price increase. Still, inflation remained below the Reserve Bank of India's medium-term target of 4 percent for the eleventh consecutive month.

Food prices rose 2.17 percent from a year earlier in June, the biggest gain in one year. Also, the food & beverages index went up 2.37 percent, with main upward pressure coming from: meat & fish (9.01 percent); vegetables (4.66 percent); non-alcoholic beverages (3.07 percent); prepared meals, snacks, sweets etc. (2.70 percent); pulses & products (5.68 percent); egg (1.62 percent); cereals & products (1.31 percent); spices (1.59 percent); oils & fats (0.74 percent); and milk & products (0.63 percent). By contrast, fruits prices dropped 4.18 percent.

Among non-food products, prices increased for housing (4.84 percent); miscellaneous (4.45 percent); pan, tobacco and intoxicants (4.11 percent); fuel and light (2.32 percent); and clothing and footwear (1.52 percent).

The corresponding provisional inflation rates for rural and urban areas were 2.21 percent and 4.33 percent, compared with May's figures of 1.86 percent and 4.51 percent respectively.

On a monthly basis, consumer prices went up 0.63 percent in June.


Friday June 14 2019
India Wholesale Inflation Slows to Near 2-Year Low of 2.45%
Office of the Economic Advisor l Rida Husna | rida@tradingeconomics.com

Wholesale prices in India rose by 2.45 percent year-on-year in May 2019, easing from a 3.07 percent gain in the previous month and below market expectations of 3.1 percent. It was the lowest wholesale inflation rate since July 2017, amid a slowdown in cost of food, fuel and manufactured products.

In May, cost of primary articles rose by 6.16 percent, slower than a 6.5 percent increase in April, mainly due to prices of food articles (6.99 percent vs 7.37 percent in April), namely vegetables (33.15 percent vs 40.65 percent), cereals (7.9 percent vs 8.43 percent), wheat (6.35 percent vs 7.52 percent), and milk (1.13 percent vs 1.49 percent). In addition, prices fell for potato (-23.36 percent vs 17.15 percent), and fruits (-3.51 percent vs -6.88 percent).

Also, cost of fuel & power increased much softer (0.98 percent vs 3.84 percent). Additionally, prices of manufactured products eased to 1.28 percent from 1.72 percent, of which chemical & chemical products (1.96 percent vs 2.92 percent), textiles (3.46 percent vs 3.92 percent), rubber and plastics (0.65 percent vs 1.66 percent), and wood and of products of wood and cork (0.67 percent vs 1.21 percent); while fell for basic metals (-2.23 percent vs 0.18 percent). 

On a monthly basis, wholesale prices increased by 0.2 percent in May, after a 0.8 percent gain in April.


Wednesday June 12 2019
India Inflation Rate Climbs to 7-Month High
MOSPI | Joana Ferreira | joana.ferreira@tradingeconomics.com

India's retail price inflation rate rose to 3.05 percent year-on-year in May 2019 from an upwardly revised 2.99 percent in the previous month and slightly above market expectations of 3.01 percent. That was the highest rate since October last year, mainly supported by higher food prices. Still, inflation came in below the Reserve Bank of India's medium-term target of 4 percent for ten consecutive months.

Food prices rose 1.83 percent from a year earlier in May, faster than a 1.10 percent increase in April. Also, the food & beverages index went up 2.03 percent, with main upward pressure coming from: meat & fish (8.12 percent); vegetables (5.46 percent); non-alcoholic beverages (3.16 percent); prepared meals, snacks, sweets etc. (2.50 percent); pulses & products (2.13 percent); egg (1.80 percent); cereals & products (1.24 percent); spices (1.23 percent); oils & fats (0.91 percent); milk & products (0.35 percent); and sugar & confectionery (0.27 percent). By contrast, fruits prices dropped 5.17 percent.

Among non-food products, prices increased for housing (4.82 percent); miscellaneous (4.62 percent); pan, tobacco and intoxicants (3.93 percent); fuel and light (2.48 percent); and clothing and footwear (1.80 percent).

The corresponding provisional inflation rates for rural and urban areas were 1.86 percent and 4.51 percent, compared with April's figures of 1.87 percent and 4.30 percent respectively.

On a monthly basis, consumer prices went up 0.57 percent in May.


Thursday June 06 2019
RBI Cuts Key Rate to 5.75%
RBI | Joana Ferreira | joana.ferreira@tradingeconomics.com

The Reserve Bank of India lowered its policy interest rate by 25bps to 5.75 percent during its June meeting and changed its monetary policy stance to "accommodative" from "neutral". It was the third straight interest rate cut so far this year, as policymakers voiced concerns about the sharp slowdown in investment activity along with a continuing moderation in private consumption growth.

Excerpts from the RBI Press Release:

In the bi-monthly monetary policy resolution of April 2019, CPI inflation was projected at 2.4 per cent for Q4:2018-19, 2.9-3.0 per cent for H1:2019-20 and 3.5-3.8 per cent for H2:2019-20, with risks broadly balanced. The headline inflation outcome in Q4 at 2.5 per cent was largely in alignment with the April policy projections.

The baseline inflation trajectory for 2019-20 is shaped by several factors. First, the summer pick-up in vegetable prices has been sharper than expected, though this may be accompanied by a correspondingly larger reversal during autumn and winter. More recent information also suggests a broad-based pick-up in prices in several food items. This has imparted an upward bias to the near-term trajectory of food inflation. Second, a significant weakening of domestic and external demand conditions appear to have led to a sharp broad-based decline of 60 bps in inflation excluding food and fuel in April; this has imparted a downward bias to the inflation trajectory for the rest of the year. Third, crude prices have continued to be volatile. However, its impact on CPI inflation has been muted so far due to incomplete pass-through. Fourth, near-term inflation expectations of households have continued to moderate. Taking into consideration these factors, the impact of recent policy rate cuts and expectations of a normal monsoon in 2019, the path of CPI inflation is revised to 3.0-3.1 per cent for H1:2019-20 and to 3.4-3.7 per cent for H2:2019-20, with risks broadly balanced.

Risks around the baseline inflation trajectory emanate from uncertainties relating to the monsoon, unseasonal spikes in vegetable prices, international fuel prices and their pass-through to domestic prices, geo-political tensions, financial market volatility and the fiscal scenario.

In the April policy, GDP growth for 2019-20 was projected at 7.2 per cent – in the range of 6.8-7.1 per cent for H1 and 7.3-7.4 per cent for H2 – with risks evenly balanced. Data for Q4:2018-19 indicate that domestic investment activity has weakened and overall demand has been weighed down partly by slowing exports. Weak global demand due to escalation in trade wars may further impact India’s exports and investment activity. Further, private consumption, especially in rural areas, has weakened in recent months. However, on the positive side, political stability, high capacity utilisation, the uptick in business expectations in Q2, buoyant stock market conditions and higher financial flows to the commercial sector augur well for investment activity. Taking into consideration the above factors and the impact of recent policy rate cuts, GDP growth for 2019-20 is revised downwards from 7.2 per cent in the April policy to 7.0 per cent – in the range of 6.4-6.7 per cent for H1:2019-20 and 7.2-7.5 per cent for H2 – with risks evenly balanced.

The MPC notes that growth impulses have weakened significantly as reflected in a further widening of the output gap compared to the April 2019 policy. A sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern. The headline inflation trajectory remains below the target mandated to the MPC even after taking into account the expected transmission of the past two policy rate cuts. Hence, there is scope for the MPC to accommodate growth concerns by supporting efforts to boost aggregate demand, and in particular, reinvigorate private investment activity, while remaining consistent with its flexible inflation targeting mandate.


Friday May 31 2019
India Q1 GDP Growth Slows to 5-Year Low
Stefanie Moya | stefanie.moya@tradingeconomics.com

The Indian economy advanced 5.8 percent year-on-year in the first quarter of 2019, slowing from a 6.6 percent expansion in the previous period and missing market expectations of 6.3 percent. It was the weakest growth rate since the first quarter of 2014, amid weaker consumer demand and fixed investment.

Slower growth rates were seen in household spending (8.1 percent compared to 8.4 percent in Q4) and gross fixed capital formation (10 percent compared to 10.6 percent). Meanwhile, government consumption (9.2 percent compared to 6.5 percent) and inventories (4.8 percent compared to 3.9 percent) increased further. Net external trade contributed negatively to the GDP, as exports went up 12.5 percent (vs 14.6 percent in Q4) and imports rose at a faster 15.4 percent (vs 14.7 percent in Q4).

Household spending accounted for 56.8 percent of the GDP (58.9 percent in Q4); gross fixed capital formation for 30.7 percent (33.4 percent in Q4); public expenditure for 9.9 percent (9.7 percent in Q4); and changes in stocks for 1.1 percent, the same as in the fourth quarter of 2018. Exports accounted for 20 percent (21.8 percent in Q4) while imports subtracted 23.3 percent (-25.7 percent in Q4).

Gross Value Added, that is, GDP excluding taxes grew 5.7 percent in the first quarter of 2019, easing from a 6.3 percent expansion in the prior period. A slowdown was recorded in manufacturing (3.1 percent compared to 6.4 percent in Q4);  trade, hotel, transport, communication and services related to broadcasting (6 percent compared to 6.9 percent); and construction (7.1 percent compared to 9.7 percent). Also, agriculture, forestry and fishing shrank 0.1 percent, after expanding 2.8 percent in the prior quarter. On the other hand, output went up further in mining (4.2 percent compared to 1.8 percent);  public administration and defence (10.7 percent compared to 7.5 percent); and financial, real estate and professional services (9.5 percent compared to 7.2 percent).




Tuesday May 14 2019
India April Wholesale Inflation Slows to 3.07%
Office of the Economic Advisor l Rida Husna | rida@tradingeconomics.com

Wholesale prices in India rose by 3.07 percent year-on-year in April 2019, following a 3.18 percent gain in the previous month and matching market expectations. Cost slowed for both fuel and manufactured products.

In April, cost of fuel & power increased at a slower rate (3.84 percent vs 5.41 percent in March). Also, manufactured products inflation eased to 1.72 percent from 2.16 percent, as prices rose less for basic metals (0.18 percent vs 1.28 percent), chemical & chemical products (2.92 percent vs 3.64 percent), textiles (3.92 percent vs 3.94 percent), rubber and plastics (1.66 percent vs 2.14 percent), and wood and of products of wood and cork (1.21 percent vs 3.27 percent).  

Meanwhile, cost of primary articles rose by 6.5 percent, faster than a 5.07 percent gain in March, with prices of food articles rising further (7.37 percent vs 5.68 percent in March), mainly driven by vegetables (40.65 percent vs 28.13 percent), pulses or grain legumes (14.32 percent vs 10.63 percent), cereals (8.43 percent vs 8.92 percent); wheat (7.52 percent vs 10.13 percent), and milk (1.49 percent vs 1.78 percent). However, there were declines in prices of potato (-17.15 percent vs 1.30 percent), onion (-3.43 percent vs -31.34 percent) and fruits (-6.88 percent vs -7.62 percent).

On a monthly basis, wholesale prices increased by 0.8 percent in April, much faster than a 0.42 percent gain in March.