April 12, 2018 / 12:37 PM / 12 days ago

Expert Views: Consumer inflation eases in March

MUMBAI/BENGALURU (Reuters) - India’s annual consumer price inflation eased to 4.28 percent in March, data from the Ministry of Statistics showed on Thursday.

FILE PHOTO: A woman pushes a shopping trolley at a food superstore in Ahmedabad, October 13, 2016. REUTERS/Amit Dave/File Photo

Analysts polled by Reuters had forecast March’s consumer price inflation to ease to 4.20 percent from 4.44 percent in the previous month.

A PRASANNA, CHIEF ECONOMIST AT ICICI SECURITIES PRIMARY DEALERSHIP, MUMBAI

“March CPI inflation was slightly higher than our estimate due to upside surprises in both food and non-food inflation.

In the current quarter, inflation is expected to go up due to base effects and seasonal rise in food prices. Inflation in the fourth quarter of FY19 is tracking around 4.5 percent, but the proposed summer crop support price hike could pose a large upside risk to H2 inflation. Accoridngly, we continue to expect RBI to hike the repo rate by 25 bps in August.”

TIRTHANKAR PATNAIK, INDIA STRATEGIST, MIZUHO BANK, MUMBAI

“Clearly, summer rainfall is one of the risks to inflation, which will weigh on food inflation. If the predictions of summer rainfall are below average, then that might have an upward pressure on inflation. Secondly, the government’s announcement on MSP (minimum support price) might also have an upward bearing on CPI inflation.

“The third risk is the continuous rise in crude oil prices. The rise in fuel rates did not commensurate with the increase in crude oil prices. If fuel inflation rises further, it might also have an impact on overall inflation.

“The inflation numbers are in line with RBI’s expectations. Nowhere do we see significant flare-ups. From that perspective, RBI should not take anything incremental in terms of interest rates from the March numbers.”

GARIMA KAPOOR, ECONOMIST AND VICE-PRESIDENT, ELARA CAPITAL, MUMBAI

“We expect RBI to revise its FY19 inflation rate projection upwards. We expect CPI inflation to overshoot RBI’s forecast to average 4.7-4.8 percent in FY19 compared with 4.5 percent in FY18.

“While today’s CPI print of 4.28 percent came in well within RBI’s projected rate of 4.5 percent, the risk to inflation going forward lies on the upside. As such, we expect RBI to respond with a rate hike during the third quarter of FY19. A generalized increase in food prices amid pick-up in rural economic activity could add to upside risks to core inflation going forward.

“Core inflation has been steadily inching up over last four months. It rose from 4.54 percent in October 2017 to 5.37 percent in March this year. In particular, items within miscellaneous index such as education and health services have already been inching up.”

ANIS CHAKRAVARTY, LEAD ECONOMIST AND PARTNER, DELOITTE INDIA, MUMBAI

“The outlook on inflation continues to remain data-dependent, but risks remain largely to the upside, especially from expectations of a rise in crude oil prices due to international output cuts, further hardening of domestic consumption, and continued impact of HRA (house rent allowance) increase.

“We expect that inflation expectations in the period ahead will possibly be shaped by oil price movement, impact of minimum support prices inclusion, fiscal slippage as GST collections remain low, and monsoon forecasts. A greater challenge would be for the RBI to set policy sentiments correctly in the coming period as higher yields, inflationary pressures and election cycle in India and US both are likely to lead to market volatility. We expect inflation prints to hover around the 5-percent mark in FY18-19.”

RUPA REGE NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCE HOLDINGS, MUMBAI

“Continuation of higher industrial growth driven by lower statistical base and relatively benign CPI inflation at 4.3 percent, driven by moderate food inflation, vindicates RBI’s stance to hold rates and keep the policy in neutral zone. Going ahead, growth and inflation are going to give increasingly lower prints.”

Reporting by Suvashree Dey Choudhury in Mumbai, Krishna V Kurup and Vishal Sridhar in Bengaluru, additional reporting by Manoj Kumar in New Delhi, Editing by Sherry Jacob-Phillips

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