INSTANT VIEW-India's consumer inflation eases to 3.28 pct y/y in Sept

Oct 12 (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.



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.


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. (Reporting by Krishna V Kurup, Jessica Kuruthukulangara in Bengaluru and Abhirup Roy in Mumbai)