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Retail inflation eases to five-year low; factory output at 1.7%

12 July, 2017

India’s annual consumer price inflation eased to a lower-than-expected 1.54% in June, the lowest since a new index was adopted in 2012, from 2.18% in May.

Separately, data showed industrial output rose 1.7% in May from a year earlier.

Suvodeep Rakshit, senior economist, Kotak Institutional Equities, said: “This print will provide room for RBI to cut repo rate by 25 bps, but scope for further rate cuts would be restricted as the RBI would likely wait-and-watch the impact of HRA (house rent allowance) increases over the next few months.

“Recent increase in vegetable and cereals prices would also keep the RBI cautious. Further, developed markets have been signalling a reversal in their policy stances for some time. ”

“While we expect the RBI to cut by 25 bps it would be in some sense a ‘hawkish’ cut.”

Industrial output
India’s industrial output grew 1.7% in May from a year earlier, government data showed on Wednesday.

Economists surveyed by Reuters had forecast 1.9% growth in output compared with a revised 2.8% year-on-year increase in April.

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Retail inflation eases to five-year low; factory output at 1.7%

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