By admin       2016-07-13

India's consumer price inflation (CPI) surged to 22 month high of 5.77 per cent in June after surging to 22-month while industrial output grew at a measly 1.2 per cent, dashing hopes of RBI cutting rates in the August policy review.The June CPI is highest since August 2014 when it was 7.03 per cent.The IIP data comes as a surprise as analysts expected it to fall 0.3 per cent but CPI data was in line with market expectation of 5.79 per cent.Government data shows CPI food inflation at 7.79 per cent in June as compared with 7.47 per cent in May.The average CPI inflation of 5.6 per cent during April-June is quite higher than the 5.6 per cent target set by RBI for FY17. However, an above normal monsoon may cool food prices and bring the CPI inflation below 5 per cent before March.In case of IIP, manufacturing output grew just 0.7 per cent while mining was up 1.3 per cent and electricity 4.7 per cent in May.Raghuram Rajan, whose term ends in September 4, has reduced policy rates by 150 bps since January.The government will soon release the data for WPI inflation, which has rose to 0.34 per cent in April after staying in negative zone for 17 straight months as global commodity prices started rising and India Inc regained some pricing power.On June 7, RBI left rates unchanged after sounding a note of caution on the spurt in CPI inflation. Rajan said the future trajectory of inflation somewhat "more uncertain" but hoped monsoon and food supply management will cool prices.Considering the upside risks, Rajan retained the inflation projections at 5 per cent in FY17 "with an upward bias". However, he added that "the expectations of a normal monsoon and a reasonable spatial and temporal distribution of rainfall, along with various supply management measures and the introduction of the electronic national agriculture market (e-NAM) trading portal, should moderate unanticipated flares of food inflation."In addition, he said capacity utilisation indicators suggest that the available headroom in industry could keep output prices subdued even as demand picks up.The May IIP data indicates India Inc's capex cycle woes continuing with capital goods output fell 12.4 per cent while consumer goods was up just 1.1 per cent--durables were up 6 per cent and non-durables fell 2.2 per cent.India's stats office CSO expects FY16 GDP growth to tick 7.6 per cent after printing at 7.2 per cent in FY15 following a raft of fiscal and monetary steps.In the Budget for FY17, the government has stepped up public expenditure in infrastructure while the RBI has slashed policy lending rate by 150 bps since January 2015 to accelerate growth.

Download App

# #

Member Login