November 20, 2008 / 6:45 AM / 10 years ago

INSTANT VIEW 3-Indian annual inflation at 8.90 pct on Nov. 8

 NEW DELHI, Nov 20 (Reuters) - India's wholesale price index
INWPI=ECI rose 8.90 percent in the 12 months to Nov. 8,
marginally below the previous week's annual rise of 8.98
percent, government data showed on Thursday.
 The rate was a shade below a median forecast of 8.99
percent in a Reuters poll of analysts.
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  KEY POINTS: SUB-INDEX           (WEIGHTING)  Nov 8   Nov 1   
 Pct change PRIMARY ARTICLES       (22.025)  250.0   249.0     
+0.4 Food articles          (15.402)  244.3   244.1      +0.1
FUEL,POWER, LIGHT AND LUBRICANTS         (14.226)  353.3  
356.6      -0.9 MANUFACTURED PRODUCTS  (63.749)  203.4   203.8 
 -0.2 Food Products          (11.538)  201.9   202.7     
-0.4
---------------------------------------------------------------
 Note: Articles in CAPITALS are sub-indices. Articles in lower
case are specific categories within the sub-indices.
---------------------------------------------------------------
 - Annual inflation for the week ended Sept. 13 was revised
up to 12.42 percent from 12.14 percent.
- The wholesale price index stood at 235.0 points in the
week ended Nov. 8.
 - Annual inflation was 3.20 percent during the
corresponding week of the previous year.
 COMMENTARY:
 SUJAN HAJRA, ECONOMIST, ANAND RATHI, MUMBAI:
 "The inflation scare is over. It will be 8 percent or below
by year-end and between 2-4 percent by March 2009. The nation
will experience deflation between June and August."
 "It is clear that the central bank had anticipated this
fall in inflation and going forward, I see much more aggressive
steps by it. The RBI will cut repo, reverse repo and CRR by 100
bps each in the near term."
 D.K. JOSHI, PRINCIPAL ECONOMIST AT RATING AGENCY CRISIL:
 "Inflation is more or less firmly on a downward trajectory.
It should come down to 5.5 percent by March 2009, which is much
below the Reserve Bank of India's (RBI) forecast. There should
be a sharper decline from December when the base effect kicks
in. "A sharper fall in inflation means more elbow room for the
RBI. I would see a reverse repo and repo cut of 50 basis
points, followed by a reduction in the reserve requirements ...
(by) a minimum of 100 basis points."
 SAILESH JHA, SENIOR REGIONAL ECONOMIST, BARCLAYS CAPITAL,
SINGAPORE:
 "By mid-March, we should see inflation hitting at around 6
to 7 percent, with the risk that we may get there even before.
 "The downside risks to GDP growth suggest that we could be
at around 5 percent growth in the next two quarters, so
inflation is not really a problem now, because the demand-side
pressures are now really dissipating.
 "In terms of loosening of the monetary policy there is a
lot of scope. On the repo rate, we think by the first half of
2009 we will be at a 4 to 5 percent range, CRR we expect at 3
percent and we expect some cuts in the reverse repo rate as
well."
 RUPA REGE NITSURE, ECONOMIST, BANK OF BARODA, MUMBAI:
 "It's in line with expectations. The tremendous easing is
due to a drastic fall in crude oil as well as metal prices.
Easing inflation will give tremendous elbow room to policy
makers to cut rates aggressively. At this pace, by December-end
inflation will be at 6.5 percent."
 A. PRASANNA, ANALYST, ICICI SECURITIES, MUMBAI:
 "The number is along expected lines. Like last week, the
fall in the index has been driven by the fuel sub-group. We
expect this trend to continue and also look for larger fall in
manufactured prices.
 "We see headline inflation dipping to 4.5 percent by March
2009. Abstracting from weekly WPI numbers, the worsening global
outlook and the evaporation in local business confidence
suggest that domestic growth will slowdown significantly over
the next four quarters putting further downward pressure on
prices.
 "We expect RBI to cut both the repo and reverse repo rates
to limit further downside risks to the economy."
 SAUGATA BHATTACHARYA, ECONOMIST, AXIS BANK, MUMBAI:
 "Although inflation seems to have fallen lower than we had
expected, we expect the momentum downwards to continue. It
still provides adequate leeway for policy authorities to pursue
expansionary measures as and when the situation demands."
 MARKET REACTION:
 The yield on the benchmark 10-year bond IN082418G=CC was
at 7.24 percent, slightly lower than 7.25 percent ahead of the
release of the inflation data.
 The partially convertible rupee INR=IN was at 50.5050/51
per dollar, unchanged from beforehand.
 LINKS: Ministry of Commerce and Industry Web site at
www.eaindustry.nic.in.
 BACKGROUND:
 - Finance Minister Palaniappan Chidambaram has said the
focus of policy has now clearly shifted towards growth but has
cautioned the problem of inflation had yet not been overcome.
 - Managing liquidity has become the short-term priority for
policy makers given a sharp squeeze in Indian markets. The
central bank has slashed banks' reserve requirements and has
cut its main short term lending rate.
 - Authorities have adopted a raft of other measures to get
money flowing around the markets again.
 - Recent revisions to data show the peak in annual
inflation at 12.91 percent on Aug. 2.
 - The Reserve Bank of India sees inflation at the end of
the 2008/09 fiscal year in March at 7 percent.
 - The Asian Development Bank has sharply revised upwards
its forecast for India's average annual inflation rate to 11.5
percent for the 2008/09 fiscal year from an earlier 4.5
percent.   (Additional reporting by Mumbai and Delhi bureaux)
 (Reporting by Rajkumar Ray; Editing by Mark Williams)

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