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India inflation accelerates to 6.84% in Feb

The reading for December was revised up to 7.31 percent from 7.18 percent.

Inflation moves up to 6.84% in Feb

New Delhi,Mar 14 (PTI) After declining for four consecutive months,inflation rose marginally to 6.84 per cent in February as food items such as rice,wheat,onions and

fruits became costlier.

Inflation based on the Wholesale Price Index (WPI) had stood at 6.62 per cent in January. In February,2012,it was 7.56 per cent.

The upward pressure on inflation may make it harder for the Reserve Bank to lower interest rates. It had projected March-end inflation at 6.8 per cent.

Ahead of the monetary policy review next week,RBI Governor D Subbarao said yesterday that inflation reading of above 6 per cent demands tightening of the policy stance.

Meanwhile,as per official data released today the rate of price rise in the manufactured items category witnessed a slight decline at 4.51 per cent last month.

Overall,inflation rate in food articles category,which has a 14.34 per cent share in the WPI basket,too witnessed a decline at 11.38 per cent. Inflation in the food articles category was at 11.88 per cent in January.

Onions were costlier by 154.33 per cent for the month of February,as against the inflation rate of 111.52 per cent in January.

Rice became costlier by 18.84 per cent in February,as against 17.31 per cent in the previous month. However,inflation in vegetables was at 12.11 per cent,from 28.45 per cent in January.

Inflation rate in wheat and cereals stood at 21.63 per cent and 19.19 per cent respectively in February.

Potato and pulses prices declined by 45.99 per cent and 14.96 per cent,from 79 per cent and 16.89 per cent respectively in January 2013.

While the inflation rate in egg,meat and fish category stood at 12.85 per cent,for milk it was up 4.57 per cent. Fruits were costlier by 8.93 per cent.

For the fuel and power category,it was up by 10.47 per cent in February,compared to 7.06 per cent in January 2013.




“The core inflation surprisingly came down to 3.8 percent,lowest since March 2010. That will give some comfort to the Reserve Bank of India to cut rates,though it would have liked the headline number to come down further. But it would be strange not to cut interest rates on the basis of LPG and onion prices going up.”


“Firm WPI inflation numbers are unlikely to throw a spanner in the way of rate cut expectations. As we had anticipated,the lower weightage of food prices shielded the headline as compared with CPI print,though impact from fuel was substantial.

“Nonetheless,RBI had long called for an adjustment in subsidised fuel prices and,with the government displaying commitment to fiscal consolidation at the recent budget,we retain our rate cut call for next week. Notably core WPI has also eased below the 4.0 percent ballpark. After next week’s cut,RBI might highlight that the quantum of easing hereafter will be contingent on easing inflation and the government’s intent to follow-through with plans to correct the fiscal imbalances.”


“It is a tad higher than our estimate of 6.6 percent. Favourable factor is easing in manufactured product inflation. Though fiscal policy has definitely created more space for monetary easing and increased likelihood for a rate cut on March 19,in my view,RBI may act on liquidity measures in this policy and may wait for a cut in annual policy,may be of larger quantum of 50 basis points. When liquidity is tight,pass-on may not be very effective.”


“The increase in WPI over the anticipated level seems to be on the back of pricing in of increase in bulk diesel prices. That perhaps partly explains the gap between consensus expectations and the final print.

“I have held the view that the RBI will go in for a 25 basis points cut in the repo rate based on a number of factors. One thing is the high and rising CPI,so RBI cannot go for a sharp rate cut and give aggressive guidance. On the other hand,there have been tangible improvements in the fiscal situation. So given these factors on balance,there would be a rate cut on Tuesday and perhaps one more in May. And,these rate cuts would be justified on balance of risk,and today’s data does not substantially alter it.

“We are looking at inflation bottoming out in September around 6.5 percent.”


“The core inflation number has fallen below 4 percent and it shows how significantly the demand deficit has grown in the manufacturing sector. And that is why despite elevated cost pressures,companies are unable to pass on these pressures to consumers.

“Today’s inflation data combined with continuous weakness in the real economic activities,in my opinion,would trigger the RBI to cut rates by at least 25 basis points on Tuesday.”


“Given that non-food manufacturing inflation is pretty weak,that will provide some room for the inflation print to stay in a range going ahead. Also,it is good to see that they have included the unsubsidised version of LPG (cooking gas) in the fuel index which has pushed up the fuel inflation.

“Though the headline number is still high,the break-up shows that inflation will continue to ease going ahead and along with the government’s fiscal consolidation efforts,there is even more reason to expect RBI to cut rates in March and for some more time going ahead.”


“The higher number is a factor of larger than expected spike in fuel index. However,consistent fall in core inflation indicates slow down in demand forces. We expect the RBI to offer a 25 bps rate cut given the recent government initiatives to improve the twin deficit along with falling core. Further slowdown in investment demand followed by moderation in private consumption calls for a monetary step in. Having said that,we expect the central bank to be more vigilant on rising retail inflation and elevated current account deficit that would guide the quantum and timing of further rate cuts in the coming fiscal year.”


“The uptick in inflation is disappointing. But we continue to expect the RBI to cut the repo by an additional 25 basis points next week,despite the wide current account deficit and inflation being above the RBI’s comfort zone. The recent budget for FY2013/14 also struck the right note between fiscal consolidation and inevitable spending increases in a pre-election year…

“Nonetheless,the RBI will remain cautious and focused on inflation for the present,even while acknowledging weak investment conditions.”


“We are looking at a 25 basis point reduction in the repo rate on Tuesday. The point that I am clearly trying to make is that unless the Reserve Bank had a trajectory of cuts in mind,it would not have done that 25 basis point cut in January. If it does not have a trajectory,the importance of that 25 basis point easing will be lost. Apart from the 25 basis point reduction on March 19,I think there will be another 25 basis point cut in 2013.”


“The core inflation is down and there are a number of supporting statements from the central bank. I expect the bond market to remain supported on this. I am expecting a 25 basis points cut both in the repo rate and cash reserve ratio.”


“The core inflation at 3.8 percent is comfortable. I expect the RBI to cut rates by 25 basis points in the policy because growth is low at 4.5 percent,fiscal consolidation is ahead of expectations and core inflation is falling substantially.”


* The benchmark 10-year bond yield dropped as much as 5 basis points as core inflation dropped more than expected. Yields rose initially as the headline figure was above expectations.

* The rupee trimmed losses to trade at 54.36/37 per dollar from 54.47 before the data.

* The main share index extended gains to trade up 0.6 percent from being flat beforehand.

* The 1-year OIS and the 5-year rate were both down 2 basis points each at 7.56 percent and 7.20 percent respectively.


* The benchmark 10-year bond yield dropped as much as 5 basis points as core inflation dropped more than expected. Yields rose initially as the headline figure was above expectations.

* The rupee trimmed losses to trade at 54.36/37 per dollar from 54.47 before the data.

* The main share index extended gains to trade up 0.6 percent from being flat beforehand.

* The 1-year OIS and the 5-year rate were both down 2 basis points each at 7.56 percent and 7.20 percent respectively.


– As inflation pressures remain the biggest concern for the central bank to cut interest rates,the latest data will set the tone for the monetary policy review on March 19.

– A majority of economists expect the Reserve Bank of India to lower the main policy rate by 25 basis points to 7.50 percent on Tuesday,a Reuters poll released this week showed.

– The February annual consumer price inflation accelerated to 10.91 percent despite overall weakness in the economy,reflecting retail price pressures.

– Last week Reserve Bank of India Governor Duvvuri Subbarao rejected the notion that high inflation is the “new normal,” noting that many of the supply-driven causes of Indian inflation can be corrected by appropriate policies.

– Although industrial output expanded for the first time in three months in January,there were pockets of weakness that underscored the challenges facing the economy as it struggles to motor on from a sharp slowdown. While production of consumer goods recovered,posting an annual growth of 2.8 percent,capital goods output — a key investment indicator — fell an annual 1.8 percent.

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