Published: Fri, October 13, 2017
Economy | By Guillermo Lane

Factory growth, inflation likely to trend higher, says Morgan Stanley report

Factory growth, inflation likely to trend higher, says Morgan Stanley report

However, on a year-on-year (YoY) basis, the country's September retail inflation was lower than the 4.39 per cent CPI rate reported for the corresponding month of last year.

The consumer price index climbed 3.28 percent year-on-year, same as in August, which was revised from 3.36 percent. Morgan Stanley expects CPI inflation to rise further to 3.8%, inching closer to Reserve bank of India's (RBI) inflation target of 4%, while WPI inflation may inch up to 3.4% in September from 3.2% in August, largely driven by higher oil prices.

The cumulative growth in these three sectors during April-August 2017 over the corresponding period of 2016 has been 3.3 percent, 1.6 percent and 6.2 percent respectively.

The YoY CPI dropped to 3.44 per cent in urban areas and 3.15 per cent in rural areas in September as compared to 3.64 per cent and 5.04 per cent respectively in the corresponding period a year ago. "A rate cut of 25 bps can be expected in Q4 provided inflation remains below 4%".

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RBI pared down its economic growth projection based on gross value added (GVA) to 6.7% for 2017-18 from 7.3% estimated earlier blaming the tepid growth in foodgrains production, adverse impact of implementation of Goods and Services Tax on the industries and weak consumer confidence.

Food and beverages during the month under consideration recorded a rise of 1.76 per cent over the same month previous year.

The output of the mining and electricity sectors grew at 9.4 per cent and 8.3 per cent as compared to August 2016. "However, 13 of the 23 sub-sectors of manufacturing with a weight of 27% in the IIP, recorded a contraction in August 2017".

Food price inflation eased to 1.25 percent from 1.52 percent.

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