MUMBAI/BENGALURU (Reuters) - India’s annual retail inflation picked up in February to 2.57 percent, after easing to a downwardly revised 19-month low of 1.97 percent in January, government data showed on Tuesday.
Analysts polled by Reuters had forecast February’s annual increase in the consumer price index at 2.43 percent.
Meanwhile, India’s industrial output in January rose 1.7 percent from a year earlier, lower than forecast, government data showed. A Reuters poll of economists had predicted a growth of 2.0 percent for January.
“February inflation affirmed expectations that the trough in inflation is behind us, as CPI ticked up to 2.6 percent year-on-year. Easing disinflation in food costs offset a small moderation in core inflation.”
“High-frequency data of food products had already pointed to a decline in vegetables, shallower fall in pulses and modest uptick in other segments. Domestic fuel prices are down from comparable period last year, but the extent of fall has eased.”
“While inflation ticks up, the extent of gains heading into FY20 is likely to be modest, reinforcing our expectations for a rate cut in April.”
RUPA REGE NITSURE, CHIEF ECONOMIST, L&T FINANCE HOLDING, MUMBAI
“Retail inflation has been hovering near 2.5 percent, led by continued deflation in food prices and benign fuel inflation. Weak food inflation would keep rural demand subdued and lower core inflation gradually. This strengthens the case for another rate cut in April with a strong commentary on transmission.”
TERESA JOHN, ECONOMIST, NIRMAL BANG INSTITUTIONAL EQUITIES, MUMBAI
“It’s a tad higher than our expectations. I had estimated it to come in at 2.43 percent. The core inflation is broadly unchanged, we had estimated it at 5.4 percent... so broadly it’s around that level.”
“I still think the RBI will go ahead and cut rates because anyway it (inflation) has been undershooting for a long time and you have seen slowdown in growth overall, be it IIP numbers or the GDP. I don’t expect a change in RBI’s stance but you are definitely seeing an overall bottoming-out in inflation. Food inflation is also bottoming out and you will see some reverse in food prices.”
TANVEE GUPTA JAIN, CHIEF INDIA ECONOMIST, UBS SECURITIES INDIA, MUMBAI
“We expect headline CPI inflation to remain below 4 percent yoy until October 2019 and average 3.8 percent yoy in FY20 (below the RBI’s medium-term target of 4 percent yoy). We expect core inflation to come off 100 bps in FY20, led by a normalisation of housing and education inflation, particularly in rural India, pass-through of recent GST cuts announced in various commodities, sustained lower oil prices and the waning HRA effect.”
“Softer inflation could give the MPC enough leeway to ease monetary policy, especially given its renewed focus on supporting growth. We expect the MPC to cut the policy rate a cumulative 75-100bps in this cycle (including the recent 25 bp rate cut in February policy).”
“Inflation reading for February is marginally higher than market expectations but it still remains within the target range of the RBI. This should still be counted as a comfortable reading and is likely to keep the room open for the central bank to cut the policy rate one more time this year.”
“Questions on core inflation, which has been a major concern for some of the MPC members, still remain. This (elevated core inflation) is one factor, which would determine the extent of rate cuts beyond 50 bps (cumulative) in the current easing cycle.”
Reporting by Krishna V Kurup, Arnab Paul, and Chandini Monnappa in Bengaluru, and Suvashree Choudhury and Abhirup Roy in Mumbai; Compiled by Shreejay Sinha