February 12, 2019 / 12:43 PM / 3 months ago

Expert Views: India's January retail inflation rate hits 19-month low

(Reuters) - India’s retail inflation rate fell to 2.05 percent in January from a year earlier, its lowest since June 2017, government data showed on Tuesday.

A customer carries his daughter as he buys goods at a store inside a shopping mall in Kolkata, India, June 20, 2018. Picture taken June 20, 2018. REUTERS/Rupak De Chowdhuri

The decline was due to a fall in food prices and smaller increases in fuel costs.

Economists in a Reuters poll predicted retail inflation would edge up to 2.48 percent in January from the downward revised December figure of 2.11 percent.

COMMENTARY

DEVENDRA KUMAR PANT, CHIEF ECONOMIST, INDIA RATINGS & RESEARCH, NEW DELHI

“I think RBI (Reserve Bank of India) will be in a wait and watch mode in the April policy. Actually what will be the fiscal policy stance of the new government will be known only in the month of July. By that time, there will be at least some idea about what the new government’s thinking is and what they’re going to do. Based on that they can have a handle on likely direction of the fiscal policy.”

“The biggest short-term risk (to inflation) is fuel because we don’t know how the geo-political situation pans out.”

MADHAVI ARORA, ECONOMIST, EDELWEISS SECURITIES, MUMBAI

“January headline CPI inflation again surprised the street and us and will also put downward pressure on RBI’s inflation estimate of 2.8 percent in 4QFY19.”

“We expect near-term inflation to be a tad lower than RBI’s estimates, and see sub-4 percent prints in 1HFY20. The rule-based MPC policy regime calls for headline inflation-targeting which remains quite comfortable in the near-term.”

“This, in conjunction with an assertive change in RBI’s tone, adds credence to our call of one more front-loaded 25 bps cut in April.”

“We do not fully rule out further cut after April, but the bar will be a tad higher and will be data-dependent. We see upside risks to RBI’s inflation trajectory in latter half of CY19 and will closely watch out for the evolution of inflation amid various idiosyncrasies and fiscal fragilities.”

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

“January CPI inflation came in well below our expectation on the back of lower food as well as non-food inflation. Headline inflation is now tracking in line with the Monetary Policy Committee’s forecasts for April-September.”

“Fiscal year 2019/20 is shaping up to be a year of two halves with inflation in first half seen at sub-4 percent and second half estimate above 4 percent. Core inflation is seen ranging broadly around 5 percent. With this inflation profile the odds of another rate cut in April policy have gone up significantly.”

SHUBHADA RAO, CHIEF ECONOMIST, YES BANK, MUMBAI

“At 2.05 percent, CPI for January is at 19-month low. Extended winter remains supportive of decelerating food prices. The fuel component too has surprised on the downside. This along with core inflation at 5.36 percent presents a scenario of CPI year-on-year between 2-3 percent over next 5 months. This raises the probability of rate cuts in April and beyond too.”

TUSHAR ARORA, SENIOR ECONOMIST, HDFC BANK, NEW DELHI

“The number is much lower than the market expectations and also better than what the RBI suggested in terms of its forecasts for the last quarter of FY19. This reinforces expectations of a rate cut in April. Should be positive for the bond market tomorrow as well.”

Reporting by Abhirup Roy and Suvashree Dey Choudhury in Mumbai, Chris Thomas and Krishna V Kurup in Bengaluru; Compiled by Rashmi Aich

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