RBI chooses to be Cautious inspite of Lower CPI Inflation


Key Takeaways from the CPI numbers…

10 Takeaways from the IIP numbers for October 2016

The IIP for the month of October 2016 came in sharply lower at -1.9% on a YOY basis. The pressure obviously comes from the manufacturing sector because the core sector has shown good growth in the month of October. What is pertinent is that this refers to the period before the pressure of demonetization started on November 09th. That means IIP numbers may come under further pressure in the months of November and December. The chart below depicts the relationship between IIP, Manufacturing Growth and the Core Sector growth over the last 18 months… Continue reading “10 Takeaways from the IIP numbers for October 2016”

Core sector growth boosts to 6.6%, second best in last 16 months

The core sector number for the month of October 2016 was announced by the Department of Economic Affairs on 30th November. The core sector consists of 8 key sectors that form the backbone of the economy and include; Steel, Cement Fertilizers, Crude Oil, Natural Gas, Refinery output, Electricity and Coal. The reason the core sector is important is that it constitutes 38% of the index of industrial production (IIP) and therefore tends to lead the IIP with a time lag. More importantly, the core sector number has strong externalities. The increase in production of sectors like steel, electricity and coal has a multiplier effect on the economy. Changes in any of these variables have a proportionately higher impact on the GDP… Continue reading “Core sector growth boosts to 6.6%, second best in last 16 months”

How India has kept its CPI & WPI inflation under control

Has India finally tamed the inflation demon?

The CPI and WPI numbers that came in during the week were a whiff of fresh air. CPI inflation at 4.20% is now already well below the RBI comfort level of 5%. The WPI inflation at 3.30% is also showing signs of tapering. There are broadly 4 issues to understand… Continue reading “How India has kept its CPI & WPI inflation under control”

Consumer inflation dips further for the month of September…

Consumer price inflation for the month of September 2016 was sharply lower at 4.31% as compared to 5.05% in the month of August 2016. It needs to be remembered that in the month of August, the CPI inflation had already shown a sharp fall from the level of 6.07% in the month of July. This sharp fall in inflation can be largely attributed to food inflation coming under control as well as the contribution of the base effect. The good monsoon during the year as well as the expectations of a bumper Kharif crop have been instrumental in bringing down food inflation as well as overall inflation sharply. Here are some key takeaways from the CPI numbers for September 2016… Continue reading “Consumer inflation dips further for the month of September…”