Tuesday March 14 2017
India Consumer Inflation Rises More Than Expected
Joana Taborda | joana.taborda@tradingeconomics.com

Consumer prices in India increased 3.65 percent year-on-year in February of 2017, following a record low rise of 3.17 percent in January and higher than market expectations of 3.58 percent. Food inflation accelerated to 2.01 percent from 0.53 percent.

Year-on-year, cost of food and beverages rose 2.46 percent (1.29 percent in January), provisional estimates showed. The food index alone rose 2.01 percent compared to 0.53 percent in the previous month. Prices increased more for sugar (18.83 percent from 18.69 percent in January) and fruit (8.33 percent compared to 5.81 percent) and fell less for vegetables (-8.29 percent compared to -15.62 percent). 

Inflation also increased for fuel and light (3.9 percent from 3.42 percent) but slowed slightly for housing (4.9 percent from 5.02 percent) and clothing and footwear (4.38 percent from 4.71 percent).

The corresponding provisional inflation rates for rural and urban areas are 3.67 percent and 3.55 percent (3.36 percent and 2.9 percent respectively in January).




Tuesday March 14 2017
India WPI Rises The Most In Over 3 Years
Office of the Economic Adviser | Rida Husna | rida@tradingeconomics.com

Indian wholesale prices rose 6.55 percent year-on-year in February of 2017, following a 5.25 percent gain in January while markets expected a 5.90 percent rise. It was the eleventh straight month of increase and the highest since November 2013, driven by a surge in prices of food while cost of manufactured products and petrol rose further.

In February, food prices went up 2.69 percent from a year earlier, following a 0.56 percent drop in the preceding month. Among food prices, wheat recorded the largest increase (8.36 percent), followed by fruits (7.14 percent), cereals (6.09 percent), rice (4.40 percent) and milk (3.93 percent) and egg, meat & fish (3.79 percent). In contrast, cost fell for: onions (-18.85 percent), potatoes (-8.84 percent), vegetables (-8.05 percent) and pulses (-0.79 percent). 

Cost of manufactured products increased by 3.66 percent, compared to a 3.99 percent rise in the previous month.

Petrol prices rose 16.72 percent year-on-year, following a 18.14 percent gain in January. Cost of diesel also increased by 33.14 percent,  compared to a 31.10 percent rise in a month earlier.

 On a monthly basis, wholesale prices went up 0.5 percent, compared to a 1.0 percent rise in the prior month.




Thursday March 02 2017
India GDP Growth Beats Expectations in Q4
Joana Taborda | joana.taborda@tradingeconomics.com

The Indian economy advanced 7 percent year-on-year in the last three months of 2016, slowing from an upwardly revised 7.4 percent rise in the previous quarter but beating expectations of a 6.4 percent growth. The expansion was mainly driven by a surge public spending and agriculture. The GDP is expected to grow 7.1 percent in the fiscal year ending in March 2017.

Private spending rose 10.1 percent, faster than a 5.1 percent increase in the previous quarter. Government spending went up 19.9 percent, higher than 15.2 percent in the previous quarter. Gross fixed capital formation expanded 3.5 percent, recovering from a 5.3 percent contraction in the previous period. Exports advanced 3.4 percent, rebounding from a 0.9 percent drop in the previous quarter. Imports rose 4.5 percent, following a 7.4 percent fall in the previous period. 

On the production side, the gross value added for public administration, defence and other services expanded the most (11.9 percent compared to 11 percent in Q3), followed by manufacturing (8.3 percent compared to 6.9 percent in Q3); mining and quarrying (7.5 percent compared to -1.3 percent in Q3); trade, hotels, transport, communication and services related to broadcasting (7.2 percent compared to 6.9 percent in Q3); utilities (6.8 percent compared to 3.8 percent in Q3); agriculture (6 percent compared to 3.8 percent in Q3); financial, insurance, real estate and professional services (3.1 percent compared to 7.6 percent) and construction (2.7 percent compared to 3.4 percent in Q3).

The data suggests that the economy was only slightly touched by demonetarization, while the economists had been predicting the gdp growth would go down much more. This can be explained by:
1. downward revision of the growth rate in the last quarter of 2015 (from 7.2 percent to 6.5 percent)
2. 40 to 50 per cent of the economy is in the informal sector and operates almost exclusively in cash while early growth estimates rely on the results of large, formal-sector companies
3.  Indian companies may have attempted to explain illicit cash holdings by stocking up on inventory or over-reporting sales. After all manufacturing growth accelerated sharply to 8 percent from 5.6 percent in the previous quarter.
Lastly, the government claim that private spending rose even more than in the quarter before the cash crunch does not add up to other indicators pointing to the sharp slowdown in both rural and urban consumption.






Tuesday February 14 2017
India WPI Rises The Most In 30 Months In January
Office of the Economic Adviser l Rida Husna | rida@tradingeconomics.com

Indian wholesale prices rose 5.25 percent year-on-year in January of 2017, following a 3.39 percent gain in December while markets expected a 3.89 percent rise. It was the tenth straight month of increase and the highest since July 2014, driven by a faster increase in cost of manufactured product and a surge in cost of petrol while prices of food fell less than in the prior month.

In January, food prices fell 0.56 percent from a year earlier, following a 0.70 percent drop in the preceding month. Among food prices, vegetables recorded the largest drop (-32.32 percent), followed by onions (-28.86 percent) and potatoes (-0.20 percent). In contrast, cost increased for: wheat (+9.49 percent), pulses (6.21 percent), cereals (5.94 percent), milk (4.19 percent); egg, meat & fish (3.59 percent), fruits (3.58 percent) and rice (2.97 percent).

Cost of manufactured products increased by 3.99 percent, compared to a 3.67 percent rise in the previous month.

Petrol prices went up 18.14 percent year-on-year, following a 8.52 percent gain in December. Cost of diesel also increased by 31.10 percent,  compared to a 20.25 percent rise in a month earlier.

On a monthly basis, wholesale prices went up 1.0 percent, compared to a 0.2 percent fall in December.


Monday February 13 2017
India Consumer Inflation Down To Record Low Of 3.17%
Joana Taborda | joana.taborda@tradingeconomics.com

Consumer prices in India increased 3.17 percent year-on-year in January of 2017, easing from a 3.41 percent rise in December and below market expectations of 3.22 percent. It is the lowest inflation rate since the series began in 2012 due to a sharp slowdown in food prices.

Year-on-year, cost of food and beverages rose 1.29 percent (1.98 percent in December), provisional estimates showed. The food index alone edged up 0.53 percent compared to 1.37 percent in the previous month. Prices increased less for sugar (18.69 percent from 21.06 percent in December) and fell for pulses (-6.62 percent from -1.57 percent) and vegetables (-15.62 percent from -14.59 percent) while cost of fruit rose more (5.81 percent from 4.74 percent). 

Inflation also eased for clothing and footwear (4.71 percent from 4.88 percent) and fuel and light (3.42 percent from 3.77 percent) but accelerated slightly for housing (5.02 percent from 4.98 percent). 

The corresponding provisional inflation rates for rural and urban areas are 3.36 percent and 2.9 percent (3.83 percent and 2.9 percent respectively in November).

A year ago, the inflation rate was higher at 5.69 percent.

On a monthly basis, consumer prices edged down 0.08 percent.


Wednesday February 08 2017
India Keeps Key Rate At 6.25%
RBI | Joana Taborda | joana.taborda@tradingeconomics.com

The Reserve Bank of India left its key repo rate unchanged at 6.25 percent for the second time at its February 2017 meeting, compared to expectations of a 25bps cut. Policymakers decided to change the stance from accommodative to neutral while assessing the effects of demonetisation on inflation and growth. The reverse repo rate was also kept at 5.75 percent and the marginal standing facility and the bank rate at 6.75 percent.

Excerpts from RBI Press Release:

The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving consumer price index (CPI) inflation at 5 per cent by Q4 of 2016-17 and the medium-term target of 4 per cent within a band of +/- 2 per cent, while supporting growth.

The Committee is of the view that the persistence of inflation excluding food and fuel could set a floor on further downward movements in headline inflation and trigger secondorder effects. Nevertheless, headline CPI inflation in Q4 of 2016-17 is likely to be below 5 percent. Favourable base effects and lagged effects of demand compression may mute headline inflation in Q1 of 2017-18. Thereafter, it is expected to pick up momentum, especially as growth picks up and the output gap narrows. Moreover, base effects will reverse and turn adverse during Q3 and Q4 of 2017-18. Accordingly, inflation is projected in the range of 4.0 to 4.5 per cent in the first half of the financial year and in the range of 4.5 to 5.0 per cent in the second half with risks evenly balanced around this projected path. In this context, it is important to note three significant upside risks that impart some uncertainty to the baseline inflation path – the hardening profile of international crude prices; volatility in the exchange rate on account of global financial market developments, which could impart upside pressures to domestic inflation; and the fuller effects of the house rent allowances under the 7th Central Pay Commission (CPC) award which have not been factored in the baseline inflation path.The focus of the Union budget on growth revival without compromising on fiscal prudence should bode well for limiting upside risks to inflation.

GVA growth for 2016-17 is projected at 6.9 per cent with risks evenly balanced around it. Growth is expected to recover sharply in 2017-18 on account of several factors. First, discretionary consumer demand held back by demonetisation is expected to bounce back beginning in the closing months of 2016-17. Second, economic activity in cash-intensive sectors such as retail trade, hotels and restaurants, and transportation, as well as in the unorganised sector, is expected to be rapidly restored. Third, demonetisation-induced ease in bank funding conditions has led to a sharp improvement in transmission of past policy rate reductions into marginal cost-based lending rates (MCLRs), and in turn, to lending rates for healthy borrowers, which should spur a pick-up in both consumption and investment demand. Fourth, the emphasis in the Union Budget for 2017-18 on stepping up capital expenditure, and boosting the rural economy and affordable housing should contribute to growth. Accordingly, GVA growth for 2017-18 is projected at 7.4 per cent, with risks evenly balanced.

The Committee remains committed to bringing headline inflation closer to 4.0 percent on a durable basis and in a calibrated manner. This requires further significant decline in inflation expectations, especially since the services component of inflation that is sensitive to wage movements has been sticky. The committee decided to change the stance from accommodative to neutral while keeping the policy rate on hold to assess how the transitory effects of demonetisation on inflation and the output gap play out. 





Monday January 16 2017
India WPI Rises at Faster Pace in December
Office of the Economic Adviser | Rida Husna | rida@tradingeconomics.com

Indian wholesale prices rose 3.39 percent year-on-year in December of 2016, following a 3.15 percent gain in November while markets expected a 3.50 percent rise. It was the ninth straight month of increase, mainly due to rising cost of manufactured products and petrol while prices of food fell for the first time since August 2015.

In December, food prices fell 0.70 percent from a year earlier, following a 1.54 percent  rise in the preceding month. Among food prices, onion recorded the largest drop (-37.20 percent), followed by vegetables (-33.11 percent). In contrast, prices went up for: potatoes (+26.42 percent), pulses (+18.12 percent), wheat (+12.82 percent), cereals (+7.49 percent), rice (+4.38 percent), milk (+4.11 percent); egg, meat & fish (+2.73 percent) and  fruits (+0.04 percent).

Cost of manufactured products increased by 3.67 percent, compared to a 3.20 percent rise in the previous month.

Petrol prices went up 8.52 percent year-on-year, following a 5.54 percent gain in November. Cost of diesel also increased by 20.25 percent,  compared to a 19.36 percent rise in a month earlier.

On a monthly basis, wholesale prices declined by 0.2 percent, compared to a 0.1 percent increase in November.


Thursday January 12 2017
India Inflation Rate Lowest Since November 2014
Joana Taborda | joana.taborda@tradingeconomics.com

Consumer prices in India increased 3.41 percent year-on-year in December of 2016, following a 3.63 percent rise in November and below market expectations of 3.57 percent. It is the lowest inflation rate since November of 2014 as food prices cooled. The slowdown in inflation intensified in the last two months of 2016 after a demonetization campaign slumped currency in circulation, hurting consumption.

Year-on-year, cost of food and beverages rose 1.98 percent (2.56 percent in November), provisional estimates showed. The food index alone increased by 1.37 percent compared to 2.11 percent in the previous month. Prices increased less for sugar (+21.06 percent from +22.4 percent in November) and fell for pulses (-1.57 percent from +0.23 percent) and vegetables (-14.59 percent from -10.29 percent) while cost of fruit rose slightly more (4.74 percent from 4.6 percent). 

Inflation also eased for clothing and footwear (4.88 percent from 4.98 percent) and housing (4.98 percent from 5.04 percent) but accelerated for fuel and light (3.77 percent from 2.8 percent). 

The corresponding provisional inflation rates for rural and urban areas are 3.83 percent and 2.9 percent (4.13 percent and 3.13 percent respectively in November).

A year ago, the inflation rate was higher at 5.61 percent.

On a monthly basis, consumer prices fell 0.61 percent.


Wednesday December 14 2016
India WPI Rises the Least in 5 Months
Office of the Economic Adviser l Rida Husna | rida@tradingeconomics.com

Indian wholesale prices rose 3.15 percent year-on-year in November of 2016, following a 3.39 percent gain in October while markets expected a 3.10 percent rise. It was the eighth straight month of increase but the lowest figure since June, as a sharp slowdown in prices of food offset a faster increase in cost of manufactured products and petrol.

In November, food prices went up 1.54 percent from a year earlier, following a 4.34 percent  rise in the preceding month. Among food prices, potatoes recorded the highest rise (+36.97 percent), followed by pulses (+21.73 percent), wheat (+10.71 percent), cereals (+7.32 percent); egg, meat & fish (+5.82 percent), rice (+4.80 percent),  fruits (+2.45 percent) and milk (+4.19 percent). In contrast, prices declined for: onion (-51.51 percent) and vegetables (-24.10 percent).

Cost of manufactured products increased by 3.20 percent, compared to a 2.67 percent rise in the previous month.

Petrol prices went up 5.54 percent year-on-year, following a 3.57 percent gain in October. Cost of diesel also increased by 19.36 percent,  compared to a 19.32 percent rise in a month earlier.

On a monthly basis, wholesale prices rose 0.1 percent, the same as in the prior month.


Tuesday December 13 2016
India Inflation Rate At 2-Year Low Of 3.6% In November
Yekaterina Guchshina | yekaterina@tradingeconomics.com

Consumer prices in India increased 3.63 percent year-on-year in November of 2016, following 4.2 percent rise in October and well below market expectations of 3.9 percent. It was the lowest inflation rate since November 2014, as food inflation eased for the fourth straight month to 2.56 percent.

Year-on-year, cost of food and beverages rose 2.56 percent (+3.17 percent in October), provisional estimates showed. The food index alone increased by 2.11 percent compared to 3.32 percent in the previous month. Prices increased less for sugar (+22.4 percent from +23.62 percent in October), pulses (+0.23 percent from +4.11 percent) and cost of vegetables continued to fall (-10.29 percent from -5.74 percent).

Cost of clothing and footwear increased 4.98 percent year-on-year (from +5.24 percent in October); fuel and light rose 2.80 percent (from +2.81 percent) and housing prices went up 5.04 percent (from +5.15 percent)

The corresponding provisional inflation rates for rural and urban areas are 4.13 percent and 3.05 percent (4.78 percent and 3.54 percent respectively in October).

A year ago, the inflation rate was higher at 5.41 percent.

On a monthly basis, consumer prices fell 0.15 percent.