Analysts at TD Securities point out that India’s CPI dropped in October to a very comfortable 3.31%, aided by declining food and clothing prices, while in contrast fuel prices continued to move higher.
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“Fuel prices eased in November while the outlook for food prices is likely to remain contained given higher than expected crop production. Moreover, a high base from last year points to lower inflation rates in the new few months before picking up again in February 19.”
“The impact of House Rent Allowance (HRA) on inflation also continues to lessen. Although 3 month ahead inflation expectations picked up in September the RBI was already aware of this at the last meeting and in any case 1 year ahead inflation expectations moderated.”
“The RBI may also be cognisant of the pick in core and core-core inflation and risks of feeding through into headline CPI, but we doubt that this will result in a hike at this meeting.”
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