Wholesale price inflation surprises analysts, eases to 6.62%

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Analysts had expected wholesale prices, India's main inflation gauge, to rise an annual 7 per cent. (Reuters) Analysts had expected wholesale prices, India's main inflation gauge, to rise an annual 7 per cent. (Reuters)
SummaryAnalysts expected wholesale prices, India's main inflation gauge, to rise an annual 7%.

for RBI to cut its policy rates by 50 basis points in its review of monetary policy in March," CII Director General Chandrajit Banerjee.

The RBI is scheduled to come out with mid-quarter policy review on March 19.

"The mild moderation in core inflation, combined with the weaker-than-expected industrial performance in December 2012, boosts the likelihood of monetary easing in mid-quarter policy review in March," ICRA Senior Economist Aditi Nayar said.

The central bank had last month lowered interest rates by 0.25 per cent saying that with inflation showing signs of remaining range bound, it was now critical to arrest the loss of growth momentum.

According to the advance estimates of Central Statistical Organisation (CSO), the GDP growth in the current fiscal is likely to be 5 per cent. However, the government expects it to be over 5.5 per cent. The economy grew by 6.2 per cent in 2011-12 fiscal.

COMMENTARY

LEIF ESKESEN, CHIEF ECONOMIST FOR INDIA AND ASEAN, HSBC, SINGAPORE"It is clearly much lower than anticipated. Things are moving in the right direction, it is positive and encouraging for the Reserve Bank of India."However, other factors will have to fall into place before the RBI eases again, and that includes continuation of structural reforms and what the budget brings.

"The RBI will also keep a close watch on the consumer price inflation and the fiscal deficit."

ABHEEK BARUA, CHIEF ECONOMIST, HDFC BANK, NEW DELHI

"We seem to be looking at continued deceleration in manufacturing product inflation. I am not sure where the relief on fuel has come from, one has to look at the fine print."However, with both the headline inflation and manufacturing coming down, we are looking at a sharp and sustained downward trend, which should give the RBI the elbow room to go ahead at least with a couple of more rate cuts in the first half itself perhaps in March and April."I am surprised at the fuel index, I thought it would be much higher."

SIDDHARTHA SANYAL, INDIA ECONOMIST, BARCLAYS CAPITAL, MUMBAI

"Given that the downside surprise is much lower for core inflation than headline inflation, it looks like the fuel group price increase has not been factored into the headline number and will be added in the numbers going ahead."The RBI is aware of easing inflation but they are worried about current account deficit. I think the GDP print will be more important. We still maintain a 75 bps rate cut view over a period of

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