INSUBCONTINENT EXCLUSIVE:
India's retail inflation rate eased slightly in July, staying below the central bank's 4 per cent medium-term target for a twelfth
straight month, strengthening views that there will be a policy rate cut in October.Annual retail inflation in July was 3.15 per cent, down
from an eight-month high of 3.18 per cent in June, data from the Ministry of Statistics showed on Tuesday.Analysts polled by Reuters had
forecast that retail inflation in July will accelerate to 3.20 per cent from a year ago, a touch above June's 3.18 per cent.Here's what
higher relative to our estimates
As expected, food prices continue to normalise even as the rise in retail prices is far lower compared with wholesale prices
Core inflation rose partly on the back of higher fuel and gold prices."We foresee food inflation edging higher in coming months even as core
inflation may subside to around 4% in face of sluggish demand conditions
Still, headline inflation may print 30-50 bps higher than the Reserve Bank of India (RBI) estimates."With inflation likely crossing 4% by
next year, we expect the MPC to maintain status quo on rates in the October policy
With 110 bps of reduction in policy rates already in place, the focus should be on improving banking transmission and using fiscal policy to
address sectoral issues."Gourav Kumar, principal research analyst, Fundsindia.Com"Consumer Price Inflation has reversed the trend this month
Low inflation is good for consumers
However, sustained low inflation may point to weak demand conditions, which may hurt production growth
Low food inflation also leaves a smaller amount of money in the hands of the farmers, hurting rural demand
A moderate level of inflation, thus, acts as an incentive for companies to produce more."In this context, the RBI's rate cuts have come on
A low-interest-rate scenario may help boost consumption demand and investments, which may, in turn, give a fillip to the economy."Sakshi
Gupta, assistant vice-president, HDFC Bank, Gurugram"Inflation figures for July are slightly lower than our expectations
Lower food and fuel inflation pulled down the overall figure for the month
This release confirms our expectations that the RBI is likely to cut rates further this year."We expect inflation to average at 3.5% in
Inflation could edge up in the second half of the year due to an unfavourable base effect, but even then it is likely to stay below
4%."Growth impulses continue to remain weak, especially in sectors such as auto that are considered as a harbinger of economic
conditions."We expect a mild uptick in the second half of FY20 as the RBI rate cuts filter through, rural income improves slightly, monsoons
catch up and as government spending returns support the system, that said, for the year we expect growth at 6.7%."Joseph Thomas, head
research, Emkay Wealth Management"Retail inflation remains subdued with most of the components indicating not much variation compared with
However, we need to make allowance for factors such as a weaker rupee, loss of crops due to heavy rains and the consequent effects on
prices, while trying to judge the future inflation levels."Garima Kapoor, economist and vice-president, Elara Capital, Mumbai"While the core
inflation is higher than last month, it remains significantly lower than 6.3% in July 2018, suggesting that demand conditions in the economy
remain subdued."Some revival in consumption would begin to kick in as government spending gathers pace, farmers receive PM KISAN
instalments, banks ease credit and transmit lower rates and improved monsoon leads to a revival in economic activity in rural India
We should begin to see gradual improvement in growth condition from Q4FY20 onwards."The government's fiscal space remains constrained
given the stiff targets for revenue realisation
We do not expect any significant fiscal stimulus in the form of GST rate cuts for some sectors from the government
The government may look to ease the burden of policy shifts for some sectors by delaying for instance the hike in vehicle registration
fees."Beyond any special fiscal stimulus, what may help the sector significantly is the pick-up in overall spending
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