Expert Views: India's consumer inflation eases to 3.28 percent in September

REUTERS - India's annual consumer inflation marginally eased to 3.28 percent in September from a year ago, government data showed on Thursday.

Analysts polled by Reuters had expected retail inflation to edge up to 3.60 percent last month from 3.36 percent in August.

India's industrial output grew 4.3 percent in August from a year earlier, government data showed.

Economists surveyed by Reuters had forecast 2.4 percent growth in output compared with a revised 0.9 percent year-on-year increase in July.

COMMENTS

RUPA REGE NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCE HOLDINGS, MUMBAI

Contrary to street expectations, CPI has fallen sequentially despite the fact that favourable base effect has unwound. This primarily reflects weaknesses in aggregate demand. Even services inflation has moderated marginally.

Primary contributors to September inflation are housing & fuels categories, which have hardened due to HRA effect on housing & global crude price effect on fuel prices. This means inflation trajectory remained well below the RBI target in H1, FY18.

Yet, the chances for rate cut look distant as IIP growth has accelerated to 4.3 percent, albeit due to a favourable base effect in capital goods & mining sectors.

In my opinion, IIP growth will not sustain at this level, as base effect will keep shifting. My IIP forecast was 5 percent - closest to the actual.

HITESH JAIN, ASSOCIATE VICE PRESIDENT - RESEARCH, IIFL WEALTH MANAGEMENT, MUMBAI

There is no room or scope for further easing rates for at least 3-4 months. RBI may take a call in March since it clearly sees inflation scaling higher.

Rising energy prices and implementation of farm loan waivers aggravates the inflationary pressure. All this will basically impart upside risk to the baseline inflation trajectory.

The spike in inflation in August was basically due to a rise in vegetable prices and food commodities ahead of the festive season. Now we see some moderation in food prices.

There will be improvement in aggregate demand for commodities during festive season.

People also attributed the spike in retail inflation in August to GST. I think the picture has to evolve, because the government is still contemplating changes to GST.

RADHIKA RAO, GROUP ECONOMIST, DBS, SINGAPORE

The pullback in food prices overwhelmed the uptick in non-food components, including the higher housing segment.

Headline is well within the central bank's estimate of 2-3.5 percent range for 1H17.

Meanwhile, core inflation at 4.6 percent continues to outpace the headline reading, which might reinforce the central bank's neutral stance.

October's inflation might also soften on seasonality and base effects, feeding into rate cut expectations.

ANJALI VERMA, ECONOMIST, PHILLIPCAPITAL INDIA, MUMBAI

The number is better than our expectations. The lower-than-expected inflation number in September is primarily driven by a contraction in food inflation. Going ahead, the key driver of inflation will be oil. But, we also need to keep an eye on food prices.

While we have a status quo stance on interest rates, continuation of muted inflation may open up room for rate cut.

(Reporting by Krishna V Kurup and Jessica Kuruthukulangara in Bengaluru)