India Inflation Unexpectedly Steadies, Opening Rate Cut Room

Updated on
  • CPI rose to 3.28 percent, slower than 3.53 percent estimate
  • India’s industrial production in August grew by 4.3%

Oxford's Kishore: RBI Policy Will Impact Inflation

India’s inflation unexpectedly slowed in September, potentially reviving calls for an interest rate cut to spur flagging growth.

Key Points

  • Consumer prices rose 3.28 percent in September from a year earlier, the Statistics Ministry said in a statement in New Delhi on Thursday
  • That was slower than the 3.53 percent median estimate in a Bloomberg survey of 40 economists
  • Food price index rose 1.25 percent, compared with August’s 1.52 percent increase
  • August’s inflation rate was revised lower to 3.28 percent from 3.36 percent

Big Picture

The weaker-than-expected inflation could add pressure on central bank Governor Urjit Patel to cut rates to revive growth that has been slowing for the past five quarters. It raises questions about the Reserve Bank of India’s forecast that inflation for the second half of this fiscal year -- October to March -- would surge to 4.2 percent to 4.6 percent from the previous projection of 3.5 percent to 4.5 percent.

Economist Takeaways

  • Once the effect of insufficient rainfall and firmer commodity prices is factored in, "we could expect the inflation rate to rise,” said NR Bhanumurthy, Delhi-based economist at the National Institute of Public Finance. "The industrial output numbers, however, seem to indicate that there seems to be a mild recovery in August."

The Details

  • Food and beverage prices rose 1.76 percent
  • Clothing and footwear rose 4.63 percent
  • Fuel and lighting rose 5.56 percent
  • Factory output rose 4.3 percent compared with the 2.6 percent survey estimate

— With assistance by Manish Modi

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