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.




Monday November 13 2017
India Inflation Rate at 7-Month High of 3.58%
Joana Taborda | joana.taborda@tradingeconomics.com

Consumer prices in India increased 3.58 percent year-on-year in October of 2017, above 3.28 percent in September and market expectations of 3.46 percent. It is the highest inflation rate in seven months, mainly driven by rising cost of food and fuel.

Prices went up faster for food and beverages (2.26 percent from 1.76 percent in September). The food index alone rose 1.9 percent, above 1.25 percent in the previous month. Inflation accelerated for vegetables (7.47 percent from 3.92 percent) while slowed slightly for fruits (5.05 percent from 5.14 percent). Prices of pulses fell more (-23.13 percent from -22.51 percent). 

Meanwhile, prices went up faster for housing (6.68 percent from 6.1 percent); fuel and light (6.36 percent from 5.56 percent) and clothing and footwear (4.76 percent from 4.63 percent).

The corresponding provisional inflation rates for rural and urban areas are 3.36 percent and 3.81 percent (3.15 percent and 3.44 percent respectively in September).


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).