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Headline inflation eased to 7.5% in December 2011 from 9.1% in November 2011, chiefly led by a decline in primary food inflation (to 0.7% from 8.5% in Nov 2011), aided by a favourable base effect.
Notably, y-o-y inflation related to non-food manufactured products declined to 7.7% in Dec 2011 from 8.1% in Oct 2011 and 8.0% in Nov 2011. However, index levels increased or remained flat for nine of the 11 sub-groups of non-food manufactured products on a month-on-month (m-o-m) basis in Dec 2011, highlighting the persistence of inflationary pressures, partly related to the depreciation of the Indian rupee.
Inflation related to primary non-food products also eased (to 1.5% in Dec 2011 from 3.2% in Nov 2011), led by fibres (-7.4% in Dec 2011 from 1.6% in Nov 2011).
Fuel inflation eased to 14.9% in Dec 2011 from 15.5% in Nov 2011, led by adjustment of various non-administered items including petrol, naphtha, ATF etc. Nevertheless, the index level rose on an m-o-m basis (to 172.6 in Dec 2011 from 171.6 in Nov 2011).
However, year-on-year (y-o-y) inflation related to minerals accelerated (to 21.9% in Dec 2011 from 18.0% in Nov 2011), highlighting the impact of the rupee depreciation. Moreover, the index level rose substantially on a sequential basis (to 318.5 in Dec 2011 from 310.5 in Nov 2011).
Inflation rate for Oct 2011 was revised upwards from 9.7% to 9.9%, nearly as high as the revised 10.0% for Sept 2011. The upward revision was led by minerals (to 22.7% from 20.4%) and non-food manufactured products (to 8.1% from 7.6%).
Outlook
WPI inflation for November 2011 is likely to be revised upwards as well, led by an anticipated revision in the minerals index.
Given the persisting inflationary pressures as highlighted by the 0.5% m-o-m rise in the price level of non-food manufactured products in Dec 2011, the RBI is expected to leave the Repo Rate and the Cash Reserve Ratio unchanged in the upcoming mid-quarter policy review, in spite of the marginal 1% growth of the Index of Industrial Production in Sept-Nov 2011.
ICRA continues to expect headline inflation to ease to 7% by March 2012, following an anticipated moderation in demand-side pressures. However, a reversal in the recent appreciation of the rupee may exacerbate prices of imported commodities and inputs, fuelling inflationary pressures.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Headline inflation eased to 7.5% in December 2011 from 9.1% in November 2011, chiefly led by a decline in primary food inflation (to 0.7% from 8.5% in Nov 2011), aided by a favourable base effect.
Notably, y-o-y inflation related to non-food manufactured products declined to 7.7% in Dec 2011 from 8.1% in Oct 2011 and 8.0% in Nov 2011. However, index levels increased or remained flat for nine of the 11 sub-groups of non-food manufactured products on a month-on-month (m-o-m) basis in Dec 2011, highlighting the persistence of inflationary pressures, partly related to the depreciation of the Indian rupee.
Inflation related to primary non-food products also eased (to 1.5% in Dec 2011 from 3.2% in Nov 2011), led by fibres (-7.4% in Dec 2011 from 1.6% in Nov 2011).
Fuel inflation eased to 14.9% in Dec 2011 from 15.5% in Nov 2011, led by adjustment of various non-administered items including petrol, naphtha, ATF etc. Nevertheless, the index level rose on an m-o-m basis (to 172.6 in Dec 2011 from 171.6 in Nov 2011).
However, year-on-year (y-o-y) inflation related to minerals accelerated (to 21.9% in Dec 2011 from 18.0% in Nov 2011), highlighting the impact of the rupee depreciation. Moreover, the index level rose substantially on a sequential basis (to 318.5 in Dec 2011 from 310.5 in Nov 2011).
Inflation rate for Oct 2011 was revised upwards from 9.7% to 9.9%, nearly as high as the revised 10.0% for Sept 2011. The upward revision was led by minerals (to 22.7% from 20.4%) and non-food manufactured products (to 8.1% from 7.6%).
Outlook
WPI inflation for November 2011 is likely to be revised upwards as well, led by an anticipated revision in the minerals index.
Given the persisting inflationary pressures as highlighted by the 0.5% m-o-m rise in the price level of non-food manufactured products in Dec 2011, the RBI is expected to leave the Repo Rate and the Cash Reserve Ratio unchanged in the upcoming mid-quarter policy review, in spite of the marginal 1% growth of the Index of Industrial Production in Sept-Nov 2011.
ICRA continues to expect headline inflation to ease to 7% by March 2012, following an anticipated moderation in demand-side pressures. However, a reversal in the recent appreciation of the rupee may exacerbate prices of imported commodities and inputs, fuelling inflationary pressures.
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