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  1. January CPI inflation eases but remains above 5%; December IIP shrinks but beats estimates

January CPI inflation eases but remains above 5%; December IIP shrinks but beats estimates

The CPI inflation in the month January eased to 5.1% from previous month's 5.21%, but continues to remain higher than the 4% target of the Reserve Bank of India; on the other hand, December IIP has beaten estimate by ET Now, but has fallen from the 25-month-high of 8.4% to 7.1%.

By: | Updated: February 12, 2018 7:21 PM
January CPI inflation eases but remains above 5%; December IIP shrinks but beats estimates. (Image: Reuters)

The CPI inflation in the month January eased to 5.1% from previous month’s 5.21%, but continues to remain higher than the 4% target of the Reserve Bank of India; on the other hand, December IIP has beaten estimate by ET Now, but has fallen from the 25-month-high of 8.8% to 7.1%.

The overall inflation — food, rural, and urban — has eased. The easing of CPI inflation was widely expected as the WPI inflation in the month of December showed a downward trend as vegetable prices stabilised after recovering from bad crop due to unseasonal rain. Ahead of the inflation data, Morgan Stanley had predicted the inflation to moderate at 5%.

Meanwhile, a poll by CNBC-TV 18 had estimated factory output to grow by 6.04%, but the IIP data has surpassed the estimate at 7.1%, however, still lower than the previous month’s surprising number. In fact, the November IIP growth has been revised further up to 8.8% from 8.4% reported earlier.

Industrial production has performed well for the second month in a row with all the major components showing growth. Encouragingly, capital goods production has now grown for the fifth month while consumer durables have also printed in positive territory signalling that demand may be coming back into the system,” Anis Chakravarty, Partner and Lead Economist, Deloitte India said.

“While growth was expected to be around the high single-digit range, the breakup shows that overall growth in the economy has bottomed out and is slowly improving. The trend suggests that the impact of GST has most likely waned away.”

The Reserve Bank of India, anticipating higher inflation on the back of crude oil prices and house rent allowance, last week maintained status quo on repo rate at 6%. The Central Bank has estimated inflation to hover above 5% in this fiscal year and between 5.1% and 5.6% in the first half of the next fiscal year, adding that in the second half the inflation may ease out a little.

“The slight cooling off in inflation numbers was essentially on the back of moderating food prices as signalled from the last month’s wholesale inflation print. Importantly, core inflation has accelerated during the last month as housing inflation, clothing and footwear prices gained momentum,” Anis Chakravarty added.

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