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Prakash Sakpal, Economist at ING, notes that India’s consumer price inflation surprised on the downside in July, coming in at 4.2% YoY, while June’s figure was revised down to 4.9% from 5.0%.

Key Quotes

“But the headline overshadowed a steady increase in the core measure to a four-year high of 6.3%. While central bank (RBI) policymakers aren’t letting their guard down against inflation, which will remain elevated due to several administrative factors apart from the high oil price, the ongoing currency weakness and higher trade tariffs will pressure inflation going forward.”

“And surprisingly strong industrial production data for June, with 7% YoY growth (although this is back-dated data), provides little solace.”

“The average April-June IP growth is still slower at 5.2% from the 6.5% average in the previous three months. This foreshadows a slowdown in GDP growth in 1Q FY2018-19, not a good start to the year, the rest of which will remain  exposed to  greater global economic uncertainty and rising domestic political risk.”

“A month ago, we downgraded our GDP growth forecast for FY2018-19 from 7.2% to 6.7%. We now increase our inflation forecast for the year from 4.7% to 5.0%.”