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Expert views - December inflation slows to 7.18 percent

Source : REUTERS
Last Updated: Mon, Jan 14, 2013 13:20 hrs
A vendor carries a basket of bananas to sell at a market in Kolkata

India's annual wholesale price inflation eased to 7.18 percent in December, government data showed on Monday, below analysts' expectations of 7.40 percent and down from 7.24 percent annual rise in November. The reading for October was revised down to 7.32 percent from 7.45 percent earlier.

COMMENTARY

SURESH KUMAR RAMANATHAN, HEAD OF REGIONAL FX AND RATES STRATEGY, CIMB, KUALA LUMPUR

"Pipeline price pressures are down but end prices are still high. Once again the dilemma RBI faces in the midst of stubborn price pressures that shows no tendency to ease. It's once again down to the wires for RBI at the end of this month when monetary policy is deliberated. Weak industrial production, easing pipeline price pressures but high CPI, a very delicate task for RBI ahead. I still see an even chance of cut but as mentioned, the RBI is in a dilemma."

A. PRASANNA, ECONOMIST, ICICI SECURITIES, PRIMARY DEALERSHIP, MUMBAI

"We expect the manufacturing index to go up in January. But, based on this data, we expect the RBI to cut rates by 25 basis points. We could see inflation below 7 percent by March, but the caveat is diesel prices. At some point, the government has to raise diesel prices, as well as coal, and electricity prices. So, we see a scope for a total of 50 basis points cut in rates in January-March and then we expect a lengthy pause from the RBI."

BACKGROUND

- India's annual consumer price inflation accelerated to 10.56 percent in December from the previous month, government data showed on Monday. Analysts had expected retail prices to rise an annual 10.20 percent, above 9.90 percent in November.

- Industrial output unexpectedly shrank in November, and while the data was badly distorted by the Diwali holiday it was still seen backing the case for an interest rate cut to boost an economy that appears set to post its slowest growth in a decade.

- The trade deficit narrowed to $17.7 billion in December from $19.3 billion in November, even after exports fell for the eighth straight month, a trade ministry official said on Friday.

- Finance Minister P. Chidambaram plans to meet investors in Asia and Europe this month in a drive to try and boost capital flows into Asia's third-largest economy, four sources with direct knowledge of the plan said.

- The government moved last Wednesday to mend its strained finances, which have hit capital investment and put its sovereign credit ratings in peril.



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