India’s consumer inflation is expected to have eased to a three-month low in April, helped by smaller rises in food prices, but with a summer rebound in prospect, the Reserve Bank of India (RBI) is likely to keep interest rates on hold. The RBI’s Monetary Policy Committee (MPC), which has a mid-term inflation target of 4 percent, maintained its hawkish stance on inflation, with most members expressing concern over upside risks to core inflation.
Consumer prices, the RBI’s main policy target, likely rose 3.49 percent in April, according to a Reuters poll of economists, compared with an increase of 3.81 percent in March.
Data on the consumer price index, wholesale price index and industrial output will be released around 1200 GMT Friday. Economists expect the central bank to keep its policy rate unchanged this year.
“RBI is not likely to cut interest rates at least for six months as inflationary pressures are building up,” said N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a Delhi-based think tank.
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Economists predict 1.5 percent annual growth in industrial output in March, bouncing from February’s 1.2 percent contraction. Wholesale price inflation is expected to have slowed last month to 4.79 percent from 5.70 percent in March, according to the poll.
In Asia, China’s annual consumer inflation edged up to 1.2 percent in April from March’s 0.9 percent, while quickening in Indonesia to a 13-month high of 4.17 percent.
CHANGE IN BASE YEAR
On Friday, India will release a new series of industrial output and wholesale inflation data, revising the base year to 2011/12 from 2004/05. India changed the base year for the country’s gross domestic product (GDP) and Consumer Price Index based inflation data about two years ago while continuing with the old base year for other macro indicators.
The delay in revising the base year has often confused the markets and policy makers who have struggled to analyse the discrepancies between the volume growth record by the IIP and value-added numbers reflected in GDP.
The base year reset is expected to bring in more accuracy in measuring the level of economic activity as well the national income, said Bhanumurthy.
The new IIP series will cover a new basket of commodities and assign new weights to them, removing obsolete items like typewriters and floppy disks, said G.C. Manna, former head of the Central Statistics Organisation.
Ideally, they should move in the same range, as value addition at constant prices could address the price factors and broadly reflect physical growth.
But the IIP series for first 11-months of 2016/17 showed a major divergence, with a contraction of 0.3 percent in manufacturing output compared with 7.7 percent growth noted in the gross value added data of GDP for the whole year.