December inflation seen up slightly, rate cut still expected
"If magnitude of revisions are high, that definitely reflects hidden demand which was not accounted for earlier and that could decelerate the pace of rate cuts," said Saugata
Bhattacharya, chief economist at Axis Bank.
The RBI said last month that it expects the inflation numbers to edge up in December and January before moderating.However, the WPI numbers may not cool as much as expected after January if the government implements a proposal to raise diesel prices every month by one rupee per litre.
"If diesel prices are raised every month, that will push up inflation expectation as the second round impact of such continuous price increase will also be high," said A. Prasanna, chief economist at ICICI Securities Primary Dealership.
New Delhi is trying to mend its finances as the end of the fiscal year in March nears, by raising railway passenger fares and subsidised fuel prices to reach its fiscal deficit target of 5.3 percent of GDP.
Asia's third-largest economy is likely to post its slowest growth in a decade this fiscal year after investment sentiment was hit by sluggish policymaking, a swelling fiscal deficit, high inflation and elevated interest rates. India is likely to post a growth of 5.5-5.6 percent in 2012/13.
Industrial output contracted 0.1 percent in November on weak capital goods production and muted consumer demand.The RBI, in recent years one of the most hawkish central banks globally, was unable to shift its policy stance towards growth until
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