Comments on CPI numbers by Ms. Radhika Rao, India Economist, DBS Bank

Ms. Radhika Rao, India Economist, DBS Bank on CPI numbers

Aug CPI was in line with our expectations at 3.4% YoY, driven by the usual suspect i.e. food pressures, along with higher housing and transport inflation. On sequential basis, such vegetables-driven uptrend usually dissipates towards Oct-Nov and we expect this to pan out this year as well. Alongside, state governments have already been tasked to curb speculative action and take anti-profiteering action. Notably core and core core inflation gauges have jumped in the month, driven by higher transport, housing and possibly transient impact from price changes due to the GST rollout (eg. health). A higher core and with Aug headline inflation is on the higher end of the central bank's 2-3.5% target for 1HFY18 will douse any lingering expectations for an October rate cut. For the September quarter, the inflation-growth dynamics are likely to be adverse, piling pressure for policy support. Jump in IP was also largely in line with our estimate, with expectations that the end of pre-GST destocking, start of the festive season, good monsoon and pick-up in disposable incomes due to higher wage/ allowances likely to provide modest support to consumption and production outlook in rest of FY18.

Source : Equity Bulls

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