INSTANT VIEW - Inflation at 1.51 pct on Oct 17

Thu, 29 Oct 2009 07:03:39 GMT

 NEW DELHI - India's wholesale price index rose 1.51 percent in the 12 months to Oct. 17, higher than previous week's annual rise of 1.21 percent, government data showed on Thursday.

It compared with a median forecast of a 1.59 percent rise in a Reuters poll.

- The food articles index in the WPI rose an annual 12.85 percent on Oct. 17.

- The wholesale price index was at 242.2 points on Oct. 17, unchanged from a week earlier.

- The annual change in WPI for the week ended Aug 22 was revised to a rise of 0.17 percent from a decline of 0.21 percent.

COMMENTARY:

SONAL VARMA, ECONOMIST, NOMURA, MUMBAI:

"Inflation is below our expectations this week because of primary and fuel prices going down. Going forward, we are expecting inflation rate to pick up to 8 percent by March 2010; that's going to be higher than the RBI's projection for this fiscal year."

MADAN SABNAVIS, CHIEF ECONOMIST, NATIONAL COMMODITY AND

DERIVATIVES EXCHANGE, MUMBAI

"There will be a tendency for the inflation to go up in the next couple of months, primarily due to the base effect."

ATSI SHETH, CHIEF ECONOMIST, RELIANCE EQUITIES, MUMBAI:

"There was a slight week-on-week increase in manufactured product prices which broadly tells us that some of the growth is being reflected now in manufactured product prices.

However, on a week-on-week basis the index was actually unchanged, which means the modest change in the number is really a base effect so it's not very surprising."

"I think this number supports the RBI's projection for March at least, and we do expect the number will keep inching up as the weeks progress and we are sure that is already happening as of October. We expect by November-December it will accelerate partly because the beneficial base effect will wear off.

SAUGATA BHATTACHARYA, ECONOMIST, AXIS BANK, MUMBAI:

"The index being steady is good news. If steel and oil prices remain under control, then inflation should be well within the central bank's target levels. We hope that this trend in inflation continues, and to a certain extent we do believe that this trend will continue.

The worst seems to be over, all the price rises due the the kharif (summer) crop failure and the festival demand is likely behind us.

There could be some increase

in industry-based commodity prices in the fourth quarter of this year, which is one risk that can potentially fuel price pressures. Otherwise, we can be close to the central bank's target by March end."

DEEPALI BHARGAVA, ECONOMIST, ING VYSYA BANK, MUMBAI:

"The rate of increase in the index has moderated significantly in the past few weeks as both demand-side and supply-side inflation has eased. Even at this gradual pace,

inflation is likely to hit 3 percent before the new index is introduced."

MARKET REACTION:

- The partially convertible rupee was almost steady at 47.52/53 per dollar after inflation data. It had closed at 47.34/35 on Wednesday.

- The 10-year bond yield eased to 7.22 percent from 7.23 before the data. It had closed at 7.27 percent in the previous session.

- The 30-share BSE index was largely unchanged at 1.2 percent down or 16,089.60 points post inflation data.

BACKGROUND:

- In an Oct. 27 policy review, the Reserve Bank of India its fiscal year-end projection of wholesale price inflation to 6.5 percent from 5 percent, with an upward bias, but kept its growth forecast for 2009/10 at 6 percent with an upward bias.

- The RBI left its key policy rates steady at its policy review, after cutting the short-term lending rate 425 basis points between October and April, but laid the groundwork for a rise in rates by ending some emergency liquidity support measures as the first phase of an exit from easy policy.

- Finance Minister Pranab Mukherjee said easy policy would continue until economic recovery is firm.

- India's industrial output expanded an annual 10.4 percent in August, its fastest pace in 22 months, signalling that rising consumer demand could fan inflation in the months ahead.

- Annual consumer price inflation was at 11.72 percent in August.

(Reporting by India Treasury Team; Editing by Jarshad Kakkrakandy)





(Reuters)

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